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The Strategic Importance of the Internet for Brazil's Development
Both Brazilians and international observers are prone to contradictory views of Brazil's future. An Austrian immigrant, Stefan Zweig, coined the expression "Brazil, a Country of the Future" the title of an insightful book published in 1941. On a more pessimistic note, Brazilians often say that Brazil is the country of the future, and always will be. During the military dictatorship (1964-1985), propaganda boasted that "Brazil was the country of the future, but now the future has arrived", an optimistic expression repeated by United States President Barak Obama during a visit to Rio de Janeiro in 2011.
At the beginning of 2014 the mood is more somber. Economic growth has been anemic over the past three years, inflation is on the rise, and the Brazilians' evaluation of their own politicians had reached a new low. In June 2013, millions of demonstrators, largely mobilized over the Internet, took to the streets in cities around the country to protest corruption, impunity, and poor public services. Many expect that mass protests of this kind will be repeated during the World Cup soccer matches to take place in June and July 2014.
In April, before the World Cup, another, less publicized international event was hosted in Brazil, the Global Multistakeholder Meeting on the Future of Internet Governance, also dubbed NETmundial. Brazil has been a leader in developing and implementing multistakeholder governance of the Internet, where government, private sector, academia, civil society organizations and Internet professionals perform this function. Brazil's model of Internet governance, embodied in the Brazilian Internet Steering Committee (Comitê Gestor da Internet no Brasil – CGI.br), was held up as a possible model for other countries and for international Internet governance during NETmundial.
In 2009, Brazilians began preparing legislation, called the Civil Rights Framework for the Internet (Marco Civil da Internet) that establishes principles, guarantees, rights and obligations for the use of the Internet in Brazil. This legislation was closely studied by participants in NETmundial. But the process by which this legislation has been developed may also be seen as a model for other countries and indeed for the international institutions involved in Internet governance. This process has been thorough, highly participatory, democratic, and has made ample use of the Internet (websites, wikis, blogs, social networks, etc.). It may herald a new, more modern mode of policy making – something of which Brazilians can be proud.
This book examines how the Internet came to Brazil, how it has developed, how it is governed, and why its future development is strategic for achieving national goals. This chapter deals with the last of these issues, presenting arguments for putting the Internet at the center of Brazil's strategy for achieving better future.
Background: Brazil in a nutshell
Brazil is the largest and arguably the most important country in Latin America. With an estimated population of 202 million in February 2014, it is also the most populous. In 2012 Brazil's economy was the seventh largest in the world according to four separate estimates by the United Nations, the IMF, the World Bank, and the CIA, ranging from US$ 2.3 to 2.4 trillion. Per capita income was US$11,354 in 2012, or 60th highest in the world according to the IMF, well above China's US$6071, but half of South Korea's.
Brazil also has well-known weaknesses. Though income inequality as measured by the Gini coefficient (running from zero for perfect equality to 1 for absolute inequality) has fallen from .57 in 1997 to .50 in 2012 according to the official Brazilian statistical agency, it is still a serious problem. Of the BRICS countries, only South Africa has a higher degree of income concentration, according to both the United Nations and CIA estimates for the latest years available. Other broad indicators put Brazil way down in the rankings. For example, the World Economic Forum's (WEF) competitiveness ranking for Brazil in its 2013-2014 report was 56 out of 148 countries, though it was the best of the BRICS countries except for China, ranked 29th. South Korea ranked 25th. The WEF competitiveness index includes a very wide range of sub-indicators covering national policies, institutions, and factors affecting productivity (e.g. education, health, innovation, and infrastructure).
The Internet and the information and communications revolution
The Internet is a great invention of the 20th Century that is changing the civilization of the 21st Century. Its power grows with the fiber optic cables that are now the nerves of the world economy. No other technology permits greater speed of transmission nor generates greater economies of scale at such a low cost as fiber optic cables. Thanks to this worldwide system of storing, organizing and sharing information, 90% of the data that exists in the world today was created over the past two years. In 2012, every day 2.5 quintillion bytes (exabytes – that is 1 followed by 18 zeros) of data were created. Meanwhile, in June 2013, the number of Internet users reached 2.4 billion, 34% of the world's population, an increase of 566% since the year 2000.8
This enormous flood of data is expected to double every two years through 2020, propelled by the increase in Internet users and their increasing consumption and production of video, among other factors.
The Internet has become the world's most important means of processing information, comparable to the invention of the printing press with moveable type by Johannes Gutenberg, that has expanded access to the printed word and the horizons of human knowledge since the 15th century. In that time paper and ink were fundamental. Today the physical means of communication are fiber optic cables, supplemented by satellites and terrestrial wireless technologies. Extending over land, under oceans or in space, together they are creating the essential infrastructure of the 21st century.
Fiber optic cables and the rapidly expanding processing power of computers are reshaping economies worldwide. Packets of information, data, text, voice and image are sent over these cables, reduced to zeros and ones transmitted over the Internet using TCP/IP (Transport Control Protocol/Internet Protocol). Combined with other information and communication technologies (ICT), the Internet is a tool with multiple uses that strengthens economic and social development as well as political participation. More and more, all forms of electronic communication – including telephony, Internet, radio and television – are being transmitted over the Internet on fiber optic cables.
Brazil has to move fast to accompany these developments. The Internet's growth in Brazil is being encouraged by federal, state and municipal governments, incumbent and insurgent telecommunications companies in large and medium-sized cities, and small Internet service providers (ISPs) that I call broadband pioneers. These small ISPs have played an important role in digital inclusion of the population, including in remote areas of the country that face many challenges.
The huge increase in the processing power of chips, and the devices that contain them (computers, tablets, smartphones, etc.), has drastically reduced the cost of transmitting, processing, and storing data, making knowledge cheaper and more accessible throughout the world. Communication based on the Internet protocols is rapidly substituting the older technologies and the business models based upon them.
While the cost of processing, transmitting, and storing data has fallen at an exponential rate, the amount of data created has exploded, facilitated by this fall in costs. Change is so rapid that institutions have been unable to keep up. Advanced systems, such as biotechnology and nanotechnology, depend on ICT. Strategies based on this wave of technological change have become critical in shaping the competitiveness and even survival of individuals, businesses, cities, and nations.
This wave of change empowers people and organizations to leap ahead of competitors that fail to adopt these strategies. The advent of ICT is an example of the "waves of creative destruction" that the great economist Joseph Schumpeter (1883-1950) analyzed in his book Capitalism, Socialism and Democracy. Because of this creative destruction, growth of traditional telephony has slowed throughout the world, with use declining in some countries. Much voice traffic already flows over the Internet. A large part of this traffic comes from traditional telephone companies, but an increasing portion is generated by computer-based software such as Skype, Viber and WhatsApp.
Meanwhile, mobile devices have proliferated. Globally the number of mobile phones already exceeded the number of fixed line phones in 2002. By the end of 2012 they reached 6.8 billion for a penetration rate of 96.2% of global population, compared with 1.2 billion fixed line phones, and the number of fixed line phones is declining as many people "cut the wire" and rely on mobile phones. Mobile phone penetration globally is expected to pass 100% of population in 2013.
But estimates of the number of unique mobile subscribers vary from 4.5 to 5.9 billion, since many subscribers have more than one mobile phone or a phone with more than one number (separate SIM card) to take advantage of special offers or coverage of different operators. Also, mobile operators are often slow to remove inactive lines. According to ICT consultancy Gartner, global smartphone sales to end users reached 968 million in 2013, a 42% increase over 2012, and for the first time accounting for over half of all mobile phones sold. That makes 2013 smartphone sales almost double the 494 million shipped in 2011. This rapid growth is now driven largely by the sales of cheaper models, priced as low as US$50 in China.
Mobile devices, led by smartphones, are producing an explosive increase in wireless data traffic — set to rise by some 300% by 2017 to a peak of 21 Exabytes, from just 5 Exabytes in 2012. Driving that rise are services like streaming video.
Video is very data-intensive compared with text, graphic, and even audio traffic. Globally, Internet video traffic is projected to be 69 percent of all consumer Internet traffic in 2017, up from 57 percent in 2012. This percentage does not include video exchanged through peer-to-peer (P2P) file sharing. The sum of all forms of video (TV, video on demand, Internet, and P2P) is projected to be in the range of 80 to 90 percent of global consumer traffic by 2017.
Benefits of an eTransformation strategy
Intensive use of ICT should be a central strategy to accelerate the development of cities, states and countries. This strategy can be called eTransformation, and the Internet provides the connectivity essential for its success. Leaders with vision, consensus formation, public policies and institutions have central roles in an eTransformation strategy (Figure 2).
An eTransformation strategy cuts across economic sectors and government agencies, taking advantages of synergies and returns to scale in infrastructure – especially for broadband Internet connectivity, computing equipment, and software. Much of current development policy and practice treats elements of eTransformation in isolation, yet most of the documented failures of ICT applications in eGovernment, eBusiness, eEducation, and rural development are traced to fragmented approaches that missed key enablers, operated within separate bureaucratic domains, and ignored synergies between different sectors and scale economies to facilitate sustained transformation.
Recent demonstrations in Brazil against corruption, impunity, and poor public services have highlighted institutional weaknesses. These weaknesses not only affect living standards, but also increase costs, reduce productivity and lower economic potential. All of these problems can be attacked using the powerful tools made available by the ICT revolution. Brazil's new transparency law that became effective for the federal, state, and municipal governments in May 2013 can be better implemented and corruption curtailed if information on government transactions, budget detail and execution of infrastructure projects are available online through transparency portals.
Improving the quality and reducing costs of education and health services, mapping crime in real time and deploying police forces more efficiently, easing traffic flow, and dealing with major emergencies through ICT-powered government operations centers are just a few of the ways in which information technology can strengthen the performance of institutions. Citizen service centers like São Paulo's Poupatempo (Timesaver), Bahia's Citizen Service Centers (Serviço de Atendimento ao Cidadao – SAC), and similar centers in other states are first steps in this direction. They speed the issuing of personal documents and other services in "one-stop shops" at locations and times convenient to citizens.
Technological and economic rationale for an eTransformation strategy
What is the underlying logic of this strategy? The starting point is the dramatic and continuing fall in the cost of processing, transmitting and storing data, information, and knowledge. The best-known principle of this revolution is Moore's Law, proposed by the cofounder and former CEO of Intel, Gordon Moore. Moore's law posits that the number of transistors that can be placed in an integrated circuit chip doubles every two years, yielding a 50% reduction in the unit cost of processing data. There are similar principles captured by other "laws", such as Butter's Law – according to which the quantity of data that can pass through an optical fiber doubles every nine months, leading to a fall in the unit transmission cost of 50% in the same period.
A key factor to consider in elaborating an eTransformation strategy is huge economies of scale in Internet infrastructure. Economies of scale are derived from the presence of high fixed costs but low marginal costs for providing increasing amounts of the good or service. The average cost per unit sold falls as the number of units sold increases. The main channels of the Internet – the trunk lines or backbone – are fiber optic cables, both terrestrial and submarine, connected to optical equipment like routers and to the datacenters of the principal operators.
These scale economies are derived from the very low marginal cost of adding more fibers to a cable before it is purchased and installed and also the fact that the same fiber base can subsequently be made more effective by replacing the optical technology used. Some additional equipment is needed, but these are broadband amplifiers and transceivers that can deal with many different channels simultaneously. Such equipment can multiply the initial speeds of transmission by tenfold or more. Thus there are opportunities for different operators or users to collaborate when investing in fiber or other facilities that provide more capacity than needed at low cost. This excess capacity can be leased to or traded with other operators in return for access to their own excess fiber.
This is a win-win proposition because the costs to each operator for fibers in a shared cable is lower than if that operator alone had to bear all the costs of investment for the capacity it needs. The more partners share the investment costs, the lower the unit costs per user. While it is not widely known, since telecommunications operators rarely reveal sharing agreements, operators commonly have arrangements between themselves, financed by transfer payments or in-kind exchanges, to take advantage of these economies of scale.
Excerpted from The Internet in Brazil by Peter T. Knight. Copyright © 2014 Peter T. Knight. Excerpted by permission of AuthorHouse LLC.
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