Book review: A Modern Guide to the Digitalization of Infrastructure

Citation

Sadowski, B. (2022), "Book review: A Modern Guide to the Digitalization of Infrastructure", Digital Policy, Regulation and Governance, Vol. 24 No. 2, pp. 220-224. https://doi.org/10.1108/DPRG-03-2022-184

In the current fast changing world of infrastructure development were buzzwords like “smart,” “digital transition” or “digital transformation” are predominant; this book is aimed at identifying “structural transformations” in infrastructure management delivered by digital technologies" (page 1). With a large variety of different types of infrastructure ranging from road, maritime, railways, aviation to electricity, postal services and the drinking water sector, the authors in this volume attempt to characterize digitalization as a general trend underlying the transformation of these sectors.

In the first chapter “Digitalizing infrastructure: active management for smarter networks,” Montero and Finger define their terminology and characterize new trends with digitalization as an “evolving process,” in which “an ever-growing volume of information is digitalized, and an ever-growing share of information can be automatically managed” (page 11). They point at the dilemma of infrastructure modernization as digital technologies can “significantly reduce costs,” but the extent to which this reduction is really taking place is depending on the appropriate “incentives” as “monopoly disincentivizes innovation and no innovation takes places in competitive markets if innovation is a pure public good (replicable at negligible cost)” (page 15). In their discussion of the effects on digitalization on demand and supply structure, the authors rightly argue that new methods of management (e.g. load factor and capacity management) have led to a situation in which “smarter networks” allow to more cost-efficiently integrate demand and supply structures. However, disruption by digitalization – as the authors call it – predates the mid-1990s on the supply side with the emergence of ISDN in the 1980s and regulatory interventions (e.g. Service Directive of 28 June 1990 that explicitly addressed the digitalization of the network). These earlier dates have consequences, as the opening of markets to foster digitalization has been vital and not been a self-governed process without regulatory intervention. The discussion on the coordination of fragmented infrastructure ecosystems discusses data sharing as a vital issue of further development but falls short on addressing competition and regulatory issues emerging at different layers of the ecosystem as discussed by Fransman (2010). Even if the challenges of digitalization are certainly related to the change in the position of incumbent companies as “online platforms” take the “role of the coordinator of the market, and the power that such a position entails” (page 36), the current problems in these markets are more related to the market power and competition issues as well as to the dominance of platforms (e.g. Digital Market Act and Digital Services Act of December 2020). In addition, this chapter falls short when discussing different theoretical perspectives (Levy and Spiller, 1994; Noam, 1992) as well as in reflecting on the evolutionary research tradition on digital ecosystems (Fransman, 2010; Krafft et al., 2014).

The second chapter “Digitalization technologies: The evolution of smart networks” by Knieps introduces the concept of “general purpose technologies (GPT)” by Bresnahan and Trajtenberg (1995) to characterize the development of emerging 5G technologies. The chapter certainly is valuable in terms of addressing the different technical challenges of an emerging 5G ecosystem such as throughput capacity, critical communications as well as requirements of massive IoT (page 47) and with respect to addressing complementary innovations (sensoring, big data processing, geo-positioning) and entrepreneurial combinations of quality of service bandwidth capacities (page 49). It remains, however, questionable if the concept of GPT is applicable to the 5G ecosystem as profitability is as well as scalability of innovations are rather difficult to identify.

In Chapter 3 “Digitalizating telecommunications: innovation, complexity and diversity in the internet ecosystem,” Stocker and Knieps focus on the question of how the development of telecommunications has moved forward toward an “ecosystem fuelled by converged general-purpose broadband networks that spur innovation and deliver an evolving array of content and applications” (page 59). Rightly the authors postulate that within this evolution there is a “tension between confluence technology and business models, on the one hand, and trends toward fragmentation, on the other” (page 59). The discussion of the critical role of entrepreneurial traffic management implies that capacity management should not be restricted by “strict network neutrality regulations and regulatory markets split,” as they “constrain the entrepreneurial search for optimal capacity allocation” (page 74). This is in line with Frischman’s argument about traffic management as a “commons strategy” (Frischmann, 2012). The coordination of the different fragmented systems driven by specialized virtual networks is rooted in a large variety of interconnection agreements and might give rise to “coordination problems that can hamper the formation of QoS-based interconnections between traffic service providers” (page 80). Even if the conceptual approach about a broadband-centric ecosystem is interesting, it would be valuable to characterize the extent to which the intensity of competition has been a main driver in new entrepreneurial ventures addressing traffic management.

Cruz and Sarmento in Chapter 4 (“Digitalization in road projects: toward a more integrated mobility supply”) indicate the importance of digitalization to more efficiently operate road infrastructure. They address the question of the extent to which the data layer, which operates a large variety of data structures ranging from maintenance and operation of infrastructure to service related activities, can be better used to support public as well as private parties to increase efficiency. One solution of the case investigated (Brisa) shows that “the private sector is identifying and reaping the economic benefits of such improvements” (page 115). The authors characterize the main barriers related to the further digitalization of road infrastructure with respect to regulatory, legal as well as technologies barriers (page 118). It would be interesting to know whether public value was created in a similar manner compared to private value appropriation and the extent to which the data are shared between the different parties in these projects.

A valuable contribution to the book is Chapter 5 “Digitalizing maritime transport: digital innovation as a catalyzer of sustainable transformation” written by Tsvetkova, Gustafsson and Wikström, as it focuses on one leading sector in the application of new sensor and IoT solutions. The purely market-driven approaches toward digitalization has led to a situation in which “the uncontrolled rising of market power of certain platforms in the maritime sector and its implications for competition, data security and consumer protection have become a concern” (page 140). In addition, there is a “need for data sharing and interoperability in order to avoid “digital fragmentation”” (page 141).

In Chapter 6 “Digitalizing railways: the platform dilemma,” Montero positions his arguments on the digitalization dilemma developed in the introductory chapter in the context of the railway sector. The interesting insights from the railway sector are derived from the fact that the sector will experience in the next years a stronger push with respect to data sharing related not only to static information (e.g. timetables and rates) but also to real-time information, which will allow new business models in the industry to develop.

In Chapter 7 “Digitalizing aviation infrastructure: the role of technology in overcoming fragmentation,” Arnold and Casullo describe how the advance of digitalization in areas such as flight information via EUROCONTROL and booking information via global distribution systems (GDS) has let to disruption and changes in the market structure. The authors expect that disruption in the sector might come from traditional “GDS platforms strengthen their position,” “global tech companies – also known as GAFA – can leverage their market power in search engines and direct messaging apps” or “new integrated mobility-as-a-service (MaaS) providers may be in the position to capture the role of traditional GDS platforms” (page 188). To underscore the importance of shared data, there are initiatives on the European level to separate air traffic data services from the provision of air traffic services. There is a threat that “centralized private monopolies could arise in the place of the state monopolies operating within national borders” (page 190) but also the potential that “new market actors in the aviation sector” (page 190) are emerging. The threats related to leveraging of market power by GAFA’s entry into the aviation sector have been established in the 2017 European Commission decision; however, the consequences of this decision for the data sharing in sector have unfortunately not been further discussed in this chapter.

Jaag in his Chapter 8 “Digitalization in the postal and delivery sector: between electronic substitution of letter mail and thriving e-commerce” approaches the challenge of digitalization in the sector from a different angle, which is related to the Universal Service Obligation. There is a pressure on “prices and incentives to become more innovative and efficient and to diversify their activities” (page 213). He proposes that providers of regulated postal and delivery services have to follow basic requirements with respect to speed, reliability, affordability and uniformity to offer postal and delivery services even under the condition of the different waves of digitalization in the sector.

In Chapter 9 “Digitalization of the electricity infrastructure: a key enabler for the decarbonization and decentralization of the power sector,” Rossetto and Reif show that the digitalization trends are related toward the generating, transmitting, analyzing of data as well as implementation of control in the industry. These new developments allow “a more granular and closer real time observation of the electricity infrastructure, a more reliable and dynamic prediction of future functioning and usage, and an enhanced and more effective control of its components” (page 249). This leads to a situation in which these waves of digitalization target “distribution grids and the premises of final customers” (page 249). The new challenges in this sector are rooted in these fundamental changes as:

• data become a more fundamental productive input;

• the distinction between transmission and distribution is blurring;

• the appearance of new products and market players requires the reassessment of rules developed for a previous area;

• regulators face a more complex and uncertain environment calling for an upgrade in the approach to regulation. (page 250)

Apráez in her Chapter 10 “Digitalization in the drinking water sector: towards smart water supply management” describes the extent to which water management tools like smart water metering, sensor networks, district meter areas, modeling and supervisory control and data acquisition might change the design, monitoring and the maintenance of water infrastructure as well as water demand management. An interesting fact has been that digitalization in the drinking water sector has rarely seen an entry of new actors, but was more related to, for example, smart home applications and digital multi-utility networks. However, currently the impact of digitalization has been “less pervasive” (page 283) compared to other sectors.

In the final Chapter 11 “Digitalization, efficiency and convergence,” Finger and Montero attempt to summarize the different sector-specific experiences into a more coherent conceptual framework. Interestingly, their conceptualization does not link to the initially specified industry-specific economic approaches like ecosystems or general purposes technologies, but focuses instead on the City-as-a-(Digital) Platform as the “ultimate sector convergence” (page 305), in which digitalization and decarbonization apparently reinforce each other. However, the literature has shown that digitalization actually increases carbonization via higher energy consumption (Lange et al., 2020). In addition, as digitalization is generated in ICT producing sectors rather than user sectors (Cecere et al., 2014), convergence is rather difficult to observe. The chapter could have gained from a summary of different sector specific experiences with respect to level of digitalization (e.g. leading and lagging sectors), infrastructure management (e.g. load and capacity management) and level of complementarity with (old) telecommunication infrastructure. From an economic view, questions remain unanswered with respect to link between the different (user) sectors (horizontal externalities) and the link between the (user) sectors and the ICT producing sectors (vertical externalities).

The book certainly examines major technological trends in the ICT ecosystem; however, it falls short in summarizing new insights from the different user sectors for the development of the ICT ecosystem as a whole. Moreover, (mobile and fixed) broadband infrastructure provision remains important for the development of user sectors like electricity or water, but the link between different types of infrastructure is rarely discussed. Furthermore, the book remains rather silent about a major challenge of digitalization of infrastructure: the extent of market competition and regulatory intervention. In times in which dominant market players increasingly foreclose and monopolize emerging technological opportunities and market segments, in particular at the data layer, this omission is serious.

Dr Bert Sadowski

Technische Universiteit Eindhoven

Eindhoven, The Netherlands

Email address: b.m.sadowski@tue.nl