Building tomorrow’s infrastructure

What does the future look like for infra­struc­ture? Accord­ing to Col­in Wil­son, part­ner and head of inter­na­tion­al projects at glob­al law firm DLA Piper, cit­i­zens in a dig­i­tal age demand a con­nect­ed and seam­less expe­ri­ence across the whole of infra­struc­ture.

“Dig­i­tal cit­i­zens want to take their smart­phone and press an app to book a flight that is sus­tain­able, which takes them to a well-con­nect­ed air­port, and then on to a new piece of metro, with the same app telling them the onward route to take by elec­tric car, bike or bus, and to pay for it all at once on that app,” he says. “So you take the user con­cept and apply the jour­ney expe­ri­ence seam­less­ly across the whole infra­struc­ture.”

These tech­no­log­i­cal changes bring sig­nif­i­cant oppor­tu­ni­ties for trans­for­ma­tion­al change in the infra­struc­ture indus­try, but at the same time require con­nect­ing com­pet­ing providers and reg­u­la­tions fit for pur­pose domes­ti­cal­ly and inter­na­tion­al­ly. All done in a way the tech-savvy con­sumer wants and at a price that works.

“How­ev­er, peo­ple then ask ‘Why does it take so long to deliv­er this?’ From a legal point of view, it’s not just a case of get­ting your cement mix­er out, it’s about the legal frame­work, rule of law and what else is need­ed to under­pin an infra­struc­ture that will deliv­er on the aspi­ra­tions,” says Wil­son.

World­wide, 1.5 mil­lion peo­ple move to cities each week to seek a bet­ter life. Some 54 per cent of the glob­al pop­u­la­tion lives in urban areas, with the Unit­ed Nations esti­mat­ing this will reach 60 per cent by 2030. Cities need to redesign them­selves for effi­cien­cy, afford­abil­i­ty and envi­ron­men­tal sus­tain­abil­i­ty if this lev­el of urban­i­sa­tion is to be man­aged.

“Green cities with smart util­i­ties and effi­cient net­works aren’t just a neat idea, they will be a neces­si­ty,” says Wil­son. “High depen­dence on renew­able ener­gy to pow­er elec­tric vehi­cles will dri­ve trans­porta­tion-as-a-ser­vice, while hous­es will need inno­v­a­tive green con­struc­tion providers.”

Curi­ous­ly, in 1897, London’s first motorised taxis were intro­duced and they were elec­tric. Prov­ing too cost­ly and unre­li­able, they were tak­en off the road by 1900. But 123 years lat­er, elec­tric cars are expect­ed to become the norm, as part of an infra­struc­ture based on the inter­net of things engi­neer­ing the future, with high-speed nation­al com­mu­ni­ca­tions infra­struc­ture at the heart of every­thing.

Green cities with smart util­i­ties and effi­cient net­works aren’t just a neat idea, they will be a neces­si­ty

Mar­tin Nel­son-Jones, part­ner and glob­al co-chair of infra­struc­ture at DLA Piper, says: “At first smart cities may be islands of con­nec­tiv­i­ty, leav­ing rur­al com­mu­ni­ties more depen­dent on gov­ern­ment help than pri­vate-sec­tor invest­ment. This begs the ques­tion of who is dri­ving this trans­for­ma­tion for­ward and the bal­ance between the pri­vate and pub­lic sec­tors. Invest­ment is need­ed to roll out fibre, because with­out that the data doesn’t flow. So how is this all going to be paid for?”

Migrat­ing to greater data flows is huge­ly com­plex. In the UK alone, an addi­tion­al £1.3 bil­lion is need­ed each year to pro­vide 5G cov­er­age to most of the coun­try by 2027 and anoth­er £2.2 bil­lion each year to deliv­er full-fibre net­works by 2033. Dat­a­cen­tre invest­ments have risen dra­mat­i­cal­ly since 2015, both in vol­ume and val­ue, and momen­tum is build­ing with deals in 2018 exceed­ing €1.2 bil­lion, accord­ing to a recent report by DLA Piper and Acuris.*

Despite infra­struc­ture invest­ment pre­dict­ed by the World Eco­nom­ic Forum to be $79 tril­lion by 2040, investors and asset man­agers are increas­ing­ly con­cerned about the longer-term demo­graph­ic, tech­no­log­i­cal and envi­ron­men­tal impact.

Most coun­tries are not mak­ing a sus­tain­able invest­ment, with an annu­al glob­al short­fall of $350 bil­lion. McK­in­sey Glob­al Insti­tute esti­mates $3.3 tril­lion must be spent annu­al­ly up to 2030 just to sup­port expect­ed glob­al rates of demo­graph­ic change and growth. Infra­struc­ture assets used to last 30 years or more, but such rapid change and inno­va­tion is caus­ing their life cycle to be less pre­dictable.

Nel­son-Jones says: “There are issues around the pace of change and future-proof­ing for infra­struc­ture investors who typ­i­cal­ly seek long-term, pre­dictable rev­enues. If they invest in, say, a dat­a­cen­tre or bat­tery stor­age, they need to assess whether ten years from now the tech­nol­o­gy is not going to have changed in a way that makes it redun­dant or needs large amounts of mon­ey spent upgrad­ing it. These investors are try­ing to get their heads round fast-mov­ing tech­nolo­gies and how to achieve a sta­ble, long-term return.”

The reg­u­la­to­ry frame­work inter­na­tion­al­ly must also be updat­ed in a strate­gic way to strike the right bal­ance between pro­tect­ing the pub­lic and sup­port­ing the huge invest­ments need­ed. The cur­rent sys­tem of infra­struc­ture reg­u­la­tion may not nec­es­sar­i­ly require a com­plete over­haul, but it does need to change, and some reg­u­la­tions go back a long way. For exam­ple, the famous Lon­don black taxis are still reg­u­lat­ed in part under the Town Police Claus­es Act of 1847.

Change will require greater co-oper­a­tion between reg­u­la­tors of dif­fer­ent indus­tries and coun­tries. For exam­ple, a jour­ney planned by smart­phone would span avi­a­tion, rail and road, poten­tial­ly in mul­ti­ple coun­tries, with data and mon­ey cross­ing bor­ders and cor­po­rate groups.

Might super-reg­u­la­tors be required? What pro­tec­tions can con­sumers expect against over­charg­ing and data mis­use or if things go wrong? What will insur­ance com­pa­nies insure?

Pre­dictabil­i­ty and account­abil­i­ty are also impor­tant para­me­ters for reg­u­la­tors tack­ling more com­plex demands, with the risk of increased reg­u­la­to­ry com­plex­i­ty and over­lap. Strong checks and bal­ances, clear reg­u­la­to­ry guid­ance and recourse to effec­tive appeals process­es will need to evolve to bal­ance the inter­ests of con­sumers, ser­vice providers, investors and soci­ety.

The sting in the tail could be an increase in dis­putes and more lit­i­ga­tion. Wil­son warns: “If projects are not pre­pared or done cor­rect­ly, and they are not deal­ing with these changes or respond­ing to new reg­u­la­tion when it comes along, then we will see a lot of lit­i­ga­tion domes­ti­cal­ly and inter­na­tion­al­ly. The idea of putting a good infra­struc­ture deal togeth­er also means mak­ing sure it is gov­erned and man­aged well over a long peri­od.”

*DLA Piper and Acuris (2019) Euro­pean Data Cen­tre Invest­ment Out­look: Oppor­tu­ni­ties and Risks in the Months Ahead

For more infor­ma­tion please vis­it dlapiper.com/infrastructure