Brazil’s Winning Internet

July 14, 2014 Dyn Research
brazil

Another World Cup is in the books, and it’s fair to say that most people will remember 2014 for the inglorious and improbable performance of the host nation, losing 7-1 and 3-0 in its semifinal and consolation matches. Brazil’s sad exit capped off a year of soul-searching about the nation’s massive investment in hosting the World Cup (and the Olympics yet to come).

But Brazil shouldn’t lose sight of one important silver lining to their World Cup cloud: the startlingly vibrant development of the Brazilian Internet, and the critical role Brazil now plays in the Internet connectivity and ICT development of South America.

Preparations for the World Cup and the Olympics may have helped light a fire under Brazil’s Internet infrastructure providers. Here’s a plot of the growth of the set of autonomous systems (that is, enterprises and service providers who originate IPv4 address space under their own registered Autonomous System Number) in Brazil over time. For comparison, we’ve also included the same statistic for South Africa. By this measure, the two World Cup host countries couldn’t be more different! brazil0

Brazil and South Africa invite comparison because of their many parallels: two emerging economies, each the dominant contributor to the GDP of an entire southern hemisphere continent, each having struggled to attract foreign investment and enough north-south Internet submarine cable infrastructure to build a 21st century economy.

Since the start of 2011, Brazil’s count of connected autonomous systems has increased by 213%, from 733 to 2,299. South Africa, in the same timeframe, grew by only 72%, from a meager 107 to 185. Brazil is the more populous country, by a factor of four. But Brazil now boasts 11.6 participating ASNs per million people, while South Africa has only 3.6.

 

Brazil’s Internet: Growing Strong

What explains the different outcomes in these two World Cup host nations? The answer probably lies in the comparative diversity of the two nations’ Internet ecosystems. Since 2004, Brazil has taken significant steps to create a national system of PTTs (Pontos de Troca de Tráfego): a network of provider-neutral Internet exchange points located in every major metropolitan area. pttmetro

These neutral points of interconnection make it easier and less expensive for Brazilian enterprises to connect to the Internet as “first class citizens” — utilizing the BGP routing protocols to negotiate simultaneous service from multiple service providers, and reducing their dependence on any single one of them.

In a country like South Africa, a typical enterprise (like a bank, or a factory, or a school) might look at the market prospects, weigh the costs, and elect to simply buy service from Telkom ZA and call it a day. In Brazil, that same enterprise is more likely to consult the experts at NIC.BR, register for an AS number and some IP space, sign contracts with a couple of service providers to route that space, and thereby maintain their provider independence.

 

Growing At the International Frontier

Local interconnection prospects seem to help improve the diversity and thus the growth prospects of the local Internet ecosystem. By paying the relatively low costs for local interconnection to a PTT in their nearest city, even small local Brazilian providers are able to directly connect to international service providers for Internet transit, rather than relying on a single large Brazilian incumbent to mediate their relationships with the outside world. That disintermediation step keeps prices lower, and the market more competitive, than if a large incumbent took a cut of every Internet transit transaction.

To see the richness of Brazil’s international interconnection, here’s another plot of Brazilian and South African autonomous system populations — but this time, we’re only counting ASNs that have their own direct Internet transit connectivity to an international provider. That is, these are Brazilian companies who buy Internet transit from non-Brazilian companies, and South African companies who buy transit from non-South African companies. brazil1

Once again, Brazil outcompetes South Africa by a substantial margin (305 to 48 at last count). This is the same metric that Renesys uses to compute our Internet Risk of Disconnection metric, with any number greater than 40 representing strong resistance to Internet shutdown. Years after their World Cup hosting experience, South Africa has struggled to reach this milestone, while Brazil adds a whole South Africa’s worth of directly connected providers each year.

 

Economic Implications

It’s hard to distinguish cause and effect, but Internet growth certainly seems to go hand in hand with strong economic growth. In the years since the PTT system buildout began (2004), Brazil’s per capita GDP (in current dollars) has steadily pulled away from South Africa’s.

GDP Per Capita ZA BR

Some part of that growth is attributable to the rise in non-extractive industries (especially services) that generate substantial exports, the kind of services that are enabled by a healthy, growing Internet infrastructure. Here’s a plot of the percentage of national service exports represented by ICT; that is, computer and telecommunications services, computer data, and news-related service transactions. In Brazil, ICT now represents the majority of all service exports; in South Africa, only about 10%, a figure virtually unchanged since the 2010 World Cup.

ICT Service Exports percentage

 

Growing Pains

Yes, Brazil still has a long way to go in terms of developing a content hosting industry that can reliably keep Brazilian content in-country, instead of sending Brazilians to the US to fetch their content.

Yes, Brazil still has too much dependency on a few specific cable routes through Miami, and yes, the speed of light latencies to non-American destinations are probably always going to be in excess of 200ms — those are the geographic cards Brazil was dealt (click to see details). brazil-dii
Yes, Brazil still has congestion problems at peak hours, at least in some towns and regions that are farther from the PTTs, as demonstrated by this plot of latencies during first round World Cup games. latencies-brazil

But if you were a company seeking to make a technology investment, would you wager on South Africa or Brazil? Strong growth in the Internet ecosystem, and the availability of direct access to international providers, make the answer seem pretty clear.

The basic diversity of infrastructure is in place to make the Brazilian Internet a survivable, high-growth environment in which to grow its ICT industries over the coming decade. There’s no need for extra time or penalty shootouts here; comparing the last two World Cup host nations, Brazil’s Internet is a clear winner.

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