Which Regions Gain the Most From Digital Transition: Urban, Suburban, or Rural?

Since the outbreak of Covid‐19, the digital transition has intensified globally. This study examines its spatial dynamics by focusing on the distribution of fast internet across settlements and how it relates to the location of IT companies and the residential patterns of IT workers. While existing research often emphasizes the urban–rural divide, we go beyond this by adopting a full‐country approach at a fine spatial scale and by distinguishing between urban, suburban, and rural contexts. The study focuses on Estonia, a digitally advanced country known for its e‐governance and digital public services. Using multiple data sources—including fast internet availability, business registry data to map IT company locations, and individual‐level census microdata to trace the residences of IT workers—we conduct a detailed spatial analysis at the settlement level. Our findings show that telecom companies provide fast internet primarily in urban areas, while public subsidies have aimed to address market failures in less urbanized regions. Areas with fast internet host nearly four times as many IT companies and three to four times as many IT workers as unconnected regions. IT companies are highly concentrated in Estonia’s two main cities, while IT workers are more dispersed, extending into suburban and exurban areas. Settlements with fast internet and higher shares of IT workers also report significantly higher income levels. The Estonian case highlights the importance of targeted public policy to address the cumulative and spatially uneven effects of digital transition. Expanding fast internet access to underserved regions is essential for inclusive and balanced regional development.