Article written by Ivo Ivanov, CEO of DE-CIX
In a world where more than 50% of the population resides in cities, urban competitiveness has transcended the realm of municipal concerns and now demands attention from regional and national governments. Regions across the globe are on a mission to revamp their economies, aiming to establish themselves as global centres of commerce, innovation, and international corporate headquarters. The secret to their success lies in their ability to attract both enterprises and citizens, and this is where digital infrastructure, as elucidated by Ivo Ivanov, CEO of DE-CIX, the world’s foremost Internet Exchange operator, plays a pivotal role.
How can a city that isn’t a traditional global hub outpace its competitors in the fierce international competition for investment, business, and talent? The answer lies in fostering a thriving digital ecosystem. Consider the remarkable transformation of Dubai as a case in point. Over the past decade, Dubai has witnessed a meteoric rise in its digital capabilities and ecosystem. Today, it proudly stands shoulder to shoulder with established international Internet hubs like Frankfurt, Amsterdam, London, New York, San Francisco, Mumbai, Singapore, and Tokyo. This remarkable transformation, driven by the UAE’s digitalization strategy, investments in digital infrastructure, and the creation of a modern, adaptive regulatory environment, has made Dubai an attractive business destination, attracting investment and top talent, and enticing global corporations to establish their control centres within its borders. The simultaneous emergence of an Internet hub and an economic powerhouse is no coincidence.
A recently released study, “The Birth of an International Internet Hub: A Playbook for Developing a Digital Society,” serves as a guide for cities and regions looking to achieve international competitiveness. By drawing from the Dubai model, including the establishment of the Dubai-based Internet Exchange UAE-IX powered by DE-CIX, the study offers insights into building such hubs and distils valuable lessons for others. It illustrates how regions can transform themselves, even those with limited digital maturity or liberalization, and assume a central role in shaping the digital economies of the future.
The Vital Role of Digital Ecosystems
The Dubai example exemplifies the transformative power of digital ecosystems, underscoring the pervasive influence of digitalization on all aspects of business and life. Easy access to digital infrastructure isn’t just a convenience for personal and business needs; it’s a linchpin for the development of cities, regions, and nations. Internet Exchanges (IXs), at the core of digital ecosystems, are the driving force behind a region’s digital evolution and the key to a digitized future.
Why is this crucial? In today’s digital landscape, interconnection demands rise in tandem with the growth of data-driven and cloud-based services and products. In a virtual or hybrid work environment, employees rely on speedy access to business applications and data. Businesses delivering digital services to their customers require high-quality, reliable services. Cities aspiring to become smart or devise intelligent mobility solutions need the capacity for real-time data transmission. To ensure seamless operation of applications and secure data transport, every millisecond counts.
This is where latency comes into play, referring to the time taken for data to travel from a user device to its destination and back. Applications underpinning our digital future require extremely low latency, especially smart IoT and critical applications like autonomous driving, smart factories, and remote surgery, which necessitate latencies in the low-millisecond range. The shortest pathways for data transmission are established by direct network interconnections at an IX.
Accelerating Urban Transformation Through Connectivity
To illustrate, the study reveals that in 2012, when UAE-IX was launched, 90% of local data traffic had to travel outside of the Gulf Cooperation Council (GCC) region, leading to significant delays, poor internet performance, and frequent outages. Fast forward to today, and 90% of locally-bound data remains local, resulting in a massive drop in latency, from 200 milliseconds in 2012 to less than 3 milliseconds in 2022. Dubai’s internet is now roughly a hundred times faster than it was a decade ago, thanks to a robust Internet Exchange.
Consequently, due to local interconnection and shorter data pathways, the international IP transit price in the UAE has plummeted by 98%, broadband internet prices have dropped by around 85%, the number of data centres has tripled, and locally-registered networks have multiplied eightfold. The UAE now leads the GCC in fixed line and mobile broadband subscriptions, with nearly 100% internet penetration. Yet, it’s not just about speed, cost, or ubiquity; it’s about the broader impact of these enhancements and the country’s digitalization strategy.
A Successful Urban Digitalization Strategy
Why should a city aspire to become an Internet hub? Because the benefits extend far beyond the digital infrastructure sector. In Dubai’s case, the strategy implemented by the UAE Telecommunications and Digital Government Regulatory Authority (TDRA), which established the regulatory framework for an IX, has yielded substantial economic advantages. Over a decade, international organizations setting up their global headquarters in the UAE have surged by over 700%, banks in the UAE have increased by 45%, and companies registered in the Dubai International Financial Centre (DIFC) have risen by 344%. In ten years, the UAE’s non-oil-based GDP has grown by 35%, the number of international universities has doubled, and the higher education student population has expanded from 140,000 to one million. The knowledge economy has taken root, aligning with Dubai’s status as an international Internet hub.
These achievements highlight the positive consequences of the country’s digitalization initiatives, commencing with the establishment of UAE-IX and the nurturing of a local digital ecosystem. The enhancement of internet connectivity’s performance and resilience, coupled with cost reductions, has fuelled growth in the local digital ecosystem, attracting substantial investment and fostering a hub for talent.
The Magnetic Pull of Interconnection
Large cities, with their sizable populations and robust economies, often lead the charge in providing high-quality connectivity. To empower regional locations to compete, it is essential to facilitate efficient local data transmission and circumvent lengthy detours. Local interconnection, coupled with a burgeoning digital ecosystem of networks and data centres, acts as a magnet, attracting more relevant networks and service providers to the region. This, in turn, encourages cloud service providers to establish local on-ramps, creating a foundation for low-latency connectivity that caters to both businesses and individuals. The study offers a roadmap for cities and regions aspiring to become Internet hubs, emphasizing investment in local digital infrastructure, expansion of high-speed broadband networks, the establishment of an IX, and regulatory adjustments to facilitate not only data flow but also talent and capital movement and the attraction of international companies.
A study by the Leibniz Centre for European Economic Research (ZEW) underscores that cities with highly developed digital economies are more competitive and experience faster growth compared to their analogue counterparts. Furthermore, a well-established broadband infrastructure benefits not only the region itself but also less-connected neighbouring areas. As each region strengthens its connectivity and digital infrastructure, the positive effects ripple more broadly, bridging the digital divide and bringing better connectivity to a broader population. The establishment of regional IX infrastructure can support national and regional digitalization strategies, extending the benefits of high-performance connectivity to more individuals and businesses, fostering participation in digital economies across city, state, and national borders.
In a world marked by surging internet traffic, latency-sensitive applications, and heightened security demands, high-performance, resilient connectivity is essential. This is made possible through new Internet Exchanges and robust regional networking. Economic regions beyond major metropolitan centres can stimulate growth in their local economies, elevating the appeal and competitiveness of their locations. Ultimately, every region’s dream is to become a global focal point for investment, innovation, and international corporate headquarters, and this dream can become a reality through embracing digitalization and establishing an Internet hub.