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by Marc Ganzi, CEO & Co-Founder of Digital Bridge Holdings, LLC
According to industry reports(1) 90% of the data in the world today was created over the last two years. As new devices, sensors, and technologies emerge and produce machine to machine communications (M2M), we believe data usage will only continue to grow. Cloud applications, growing enterprise outsourcing and the accelerating pace of data creation require more storage and more compute which means there is an increasing demand for data centers, fiber, towers and other communications infrastructure worldwide.
U.S. vs. Europe
We believe the growing demand for data to be stored and delivered within Europe may present an opportunity to close the gap with North America in terms of deploying data center infrastructure. “Hyperscale” players are accelerating their infrastructure investments across Europe to meet the demand from consumer and enterprise adoption. We are already seeing an exciting technology revolution play out today, especially in the Nordic region. There have been significant investments in the Viking countries from leading cloud brands such as Microsoft, Google, Facebook, and Apple. It’s similar to what we saw happen in the U.S. in regions like Santa Clara, CA and Ashburn, VA. And, once a market becomes an established data center destination, it can create a “gravitational pull” leading other operators, customers and fiber providers to follow suit. Tower and fiber infrastructure also need to scale to match the demand created by the growth of digital content and the need to access cloud based services.
The sheer quantum of capex required to deliver on the promise of 5G networks in Europe is significant and will create attractive investment opportunities. As a firm, Digital Colony has spent a considerable amount of time in Europe as an investor and, most recently, as an operator of a Mobile Network through our partnership with Digita. We ranked the sub-markets across Europe and we believe that the Nordic region is well positioned to capitalize on the growth for infrastructure necessary to support the digital economy.
The Nordic opportunity
We believe the Nordics are uniquely positioned to benefit from the accelerating demand for infrastructure, starting with the lower total cost of operations driven, in part, by access to low cost, clean energy. The cost of energy in the Nordic region is not only priced attractively ‒ it’s nearly half compared to the U.K. and Germany ‒ but it’s also 100% renewable or clean, coming from hydroelectric sources. In addition, the region allows for “free cooling,” which helps to dramatically reduce overall costs. The energy advantages are bolstered by the region’s highly educated workforce, strong sovereign credit profile and generally business friendly and stable environments. The Nordics also have fiber-dense metropolitan areas – the critical connective tissue for digital infrastructure and data center development. The icy countries are twice as developed when comparing their FTTH/B fiber deployments to the rest of Europe(2).
According to the European Commission’s Digital Economy and Society Index (DESI) 2017 Digital Economy and Society Index (DESI) 2017, Denmark (1), Finland (2), Sweden (3) and Finland (4) have the most advanced digital economies in the European Union with high mobile data usage compared to the rest of Europe and globally.
In addition, the Nordics have healthy and well-capitalized MNOs with two strong regional operators that allow for the rapid adoption of mobile applications and data consumption. The Nordics have developed a very sophisticated digital economy that understands technology and has adopted wireless as its primary mechanism of communication and commerce. It’s also desirable from a macroeconomic perspective, with early-adopting consumers, an entrepreneurial culture due to the presence of Ericsson and Nokia. Also, the history of mobile infrastructure sharing among Nordic MNOs created an environment in which we wanted to do business.
When partnering with Digita, we really liked the CEO Juha-Pekka (JP) Weckström, his team, and what they have been able to accomplish. Digita has a forward-looking perspective on what communications infrastructure looks like and what core capabilities are required to meet its customers’ demands. It’s not only TV and radio broadcasting infrastructure, but it’s also mobile towers and mobile communication sites. Digita owns approximately one thousand kilometers of fiber and it owns four data centers. The ability to deliver hard-wireless infrastructure in the form of a tower, address connectivity issues from a fiber perspective and manage storage issues through a data center perspective coincides with our belief around converged networks. Digita is the first investment we have made that has all four pieces of the ecosystem in its core business. We believe Digita is well-positioned in the crux of this growing demand and need for infrastructure across the comminfrastructure sector.
(1) Source: IBM Marketing Cloud, (2) IDATE for FTTH Council Europe