Final Report:

Internet Topology and Connectivity in the Americas

by Eric Arnum earnum@interport.net

Technical Conference for the Implementation of IABIN

Brasília, 15-18 April, 1999

The Internet is soaring in popularity in South America, Central America, and the Caribbean, growing from a historically small base into a new mass medium in just the past five years.  An examination of the Web, email and Internet access markets in all the countries south of Mexico reveals a very rich and diverse amount of Web content and Internet access options in virtually any city with phone service.

There are literally thousands of  Web and email services in Spanish and Portuguese available to the Internet user.  Virtually every major city has one or several Internet Service Providers (ISPs), although the cost of calls remains a problem.  Every country south of Mexico has numerous Internet hosts and Web pages.  But getting to all that content remains a major challenge.

The average cost of an ISP connection in Latin America is around US$36 per month for an unlimited amount of connect time, based upon a study conducted for this report of 215 ISPs in 18 countries.  However, phone calls to those ISPs, no matter how local, remains a costly proposition, because Internet users tend to stay on for many minutes per session.  Internet calls are much longer than regular phone calls, and unfortunately the per-minute fees of phone companies are charged for both.  This is a major problem with a simple solution: cease charging per minute rates for long phone calls.

The high cost of timed local phone calls combined with the difficulty obtaining PCs, modems, and extra phone lines has kept the size of the Internet population small in these regions.  The Internet infrastructure in South and Central America is generally young, but there is an encouraging amount of related infrastructures such as TV broadcasting, telephony, electricity, and mobile communications.  The problem is that the price of Internet communications keeps it a luxury for the fortunate.

While the demand for Internet services remains dampened by its comparatively high cost in Latin America, the supply of Internet-based computer services is soaring.  In 1998, the number of Internet hosts in the Latin American domains soared 95%, almost double the 48% rate seen in 1997, according to statistics gathered by Network Wizards, a California company that conducts a census every January and July. http://www.nw.com/zone/WWW/top.html

In the year leading up to the January 1999 census, the number of Internet hosts in Latin America virtually doubled, to 491,000, and the number of Web pages published nearly tripled to 2.7 million.  In both these instances, growth in Latin America was much faster than the worldwide average (88% and 70%, respectively).  So 1998 was a record year for Internet growth in Latin America.

The largest Internet markets in Latin America are by far Brasil and Mexico.  The growth in the number of Internet hosts and the Web page population is documented in the following Powerpoint slides.

Similar slides are available for each of the other Latin American markets, as well as for select North American countries and domains.

Numerically, there are now 491,355 Internet hosts in the Caribbean, Central, and South American regions.  For the purposes of this study, Mexico is included but the USA and Canada are not.  The national two-letter domains of 48 countries are included, but the three-letter COM, NET and ORG domains are not included.  To varying degrees, all of the small Caribbean countries and territories are included, but the investigation of the smallest 14 was not pursued as deeply as for the other 34.

A summary of the size of the Internet infrastructure in these 48 countries as of January 1999 is included in the following table.

TABLE 2.1

INTERNET HOSTS AND WEB PAGES

PUBLISHED IN LATIN AMERICA,

INSTALLED BASE IN JANUARY 1999

Hidden among these raw statistics are some surprising facts.  As mentioned, statistics for these 48 countries were gathered for Internet hosts and Web pages.  However, statistics also were gathered for complementary infrastructures such as televisions, telephones, and electricity production.  In addition, population, size and gross domestic product figures were gathered for these 48 countries.  This allowed per capita rates to be computed for the Internet infrastructures in the 48 countries and territories.

While it is true that the rate of diffusion of the Internet in relative terms remains much larger in Canada and the USA, there are several places in Latin America that compare favorably with parts of Europe.  The per-capita size of the Internet infrastructures in Uruguay, Belize, Chile, Argentina, Costa Rica, Mexico, and Brasil is in roughly the same range of diffusion rate found in Italy, France, or Russia.  South and Central America acount for only 1 percent of the world’s Internet infrastructure.  However, there is more content written in Spanish (1.5%) on the Web than there is in either Italian or Japanese.  There is more content written in Portuguese (0.5%) on the Web than there is in Swedish, Korean, or Dutch.

Keep in mind, however, that English is by far the dominant language of the Internet, accounting for upwards of three-quarters of all content published on the Web, according to statistics compiled for this report from data available on the Alta Vista search engine.  http://altavista.digital.com/  In fact, numerous small island nations and current British colonies were excluded from this report not because they lacked an Internet infrastructure, but because their reliance on the English language and their close ties to the US and UK markets has put them on a different development track than the rest of the Caribbean.

The inescapable conclusion from this six-month study of the Internet in Latin America is that the supply of innovation is impressive in the region.  There are at least 300 to 400 Internet Service Providers (ISPs) providing access in Latin America, of which 215 were examined for the purposes of this report.  The most ISPs were found in Brasil, Mexico, Argentina, Colombia, Honduras and Chile.  The least expensive ISPs were found in Peru, Suriname, Belize, French Guiana, Mexico, and Brasil.

Brasil and Mexico, therefore, are market leaders in several notable respects.  First, their BR and MX national domains contain the most Internet hosts and Web pages of the Latin American region.  Second, they are leaders even when these statistics are compared with population and GDP.  Third, they have the most Internet service providers, most of which are among the lowest-priced in the region.

The average price of a monthly untimed Internet access subscription for a business in Latin America is around US$36.23, based on a survey of 215 ISPs.  However, the rates vary tremendously, even within a given country.  In Brasil, the range of rates for unlimited hour plans was R$18 to R$58.  In Mexico, the range was MN$183 to MN$300 for the identical service.  There were ISPs found in both Argentina and Trinidad that attempt to charge more than US$100 per month for unlimited hour services.  However, there were ISPs found in Peru,Brazil, and Mexico that charge less than US$20 per month (given exchange rates as of 16 April, 1999), which is the generally-accepted average monthly rate in the USA.

TABLE 3.1

ISPs FOUND AND AVERAGE RATES

IN LATIN AMERICA

These 215 ISPs were found through Web searches during the period September 1998 to April 1999, and were each probed for pricing information and rate plans.  All of the notes on their location, rates, and terms of service can be found in a separate document located at http://www.iabin.net/document/internet/sur-isps

on the IABIN Web site.

Across the Latin American region, there are thousands of Web sites providing information of local and national interest, and almost all are doing so in either Spanish or Portuguese.  English is not used widely on the Web in the 48 national domains of Latin America (except in former UK territories).  However, there is a heavy use of graphics, sound, animation, frames, and Java, making many of these Web sites as innovative as any to be found in Europe or North America.  The business sophistication of these sites is likewise impressive, with electronic commerce, Webmail, homebanking, shopping, financial, sports and news services found in abundance.

The supply of customers in Latin America is vast: nearly 500 million people south of the Texas/Mexico border versus 300 million north of it: almost a 60/40 ratio.  The problem seems to be the relative lack of infrastructure (and the high price of the available infrastructure) -- particularly PCs, modems, and dial-up phone lines.

An examination of comparable infrastructures reveals that while the north/south split is around 60/40 in terms of people, it's more like 25/75 in terms of roads, railways, and television ownership.  In other words, while there are more people in the south, there is more communications infrastructure in the north.

But in terms of telephones, the split is 17/83, and in electrical production it is 16/84.  There is simply not enough wiring: phone and electric.

Even in places where there is an infrastructure, however, access to the Internet is expensive.  Even in countries with many phones, such as Brasil and Mexico, and those with heavy per-capita electrical production, such as Venezuela and Argentina, the cost of connecting to the Internet is high.  But the bulk of the costs incurred are for the timed local phone calls to the ISP’s point of presence – not for the ISP access itself!

A 1997 study by the Organisation for Economic Cooperation and Development (OECD) found that of its 27 member states, Mexico had the highest overall monthly cost for Internet access, but fully US$65 of the US$95 average cost per month was for local phone calls in support of modem dial-up Internet calls.  Evidently, not much has changed in the past two years.  The OECD found that the average cost of ISP access in Mexico was US$30 in 1997.  This research study found an average rate of N$248 in 1999, which translates to US$26.10 at current exchange rates.

The important thing to remember is that the ISP subscription cost only US$26 to US$30 in Mexico, less than the median cost of ISP access in Sweden, Japan, or Greece.  Significantly, the cost of ISP access in Mexico is a bit lower than it is in Spain, and the cost of ISP access in Brasil is about half as much as it is in Portugal!

Among Internet users, the local phone calls cost much more, because Internet calls tend to exceed 20 minutes, and frequently last hours at a time.  People simply lose track of time while surfing Web sites, reading online news, or chatting with their friends.  In fact, according to a study performed by a Canadian telephone company, the longest ISP calls of all generally occur in the middle of the night, suggesting that the image of a heavy user as the insomniac loner at his desk all night is not completely false.

In Latin America, as in Europe, the insomniac loner generally will pay more money for the increase in their telephone bills than for their ISP subscription.  Only in French Guiana, Belize, Suriname, and Peru are ISP rates below prevailing North American rates.  And in none of those countries are local telephone calls either free or flat rate.

Generally, local voice phone calls average five minutes.  In addition, there are human communications factors that prevent voice phone calls from continuing for hours (people run out of things to say).  However, the average modem’s phone call to an ISP is 20 minutes.  So a per-minute rate structure engineered generations ago for local calls hurts Internet users proportionately more than voice users.

Source: OECD

To reach the Internet, the typical Latin American user must first find a phone line and a power outlet (of course, they need a PC and modem to plug in to the phone line and electrical power grid).  Once they secure these wired network connections, then they need to make local phone calls, which are billed by the minute.  Under such a scenario, it does not matter if the content on most Web sites is free.  It does not matter if the ISP charges a flat rate for an unlimited number of hours per month.  In fact, the ISP could even be free, as several popular British ISPs currently are.  It doesn’t matter.  The heavy Internet user will still get a massive phone bill for all those long-duration phone calls to their ISP.  They feel tricked when they find out that the ISP cost is a minor component of their overall cost of access.

This per-minute pricing is a massive problem in Latin America.  People fortunate to have a phone line must pay almost twice as much for the phone calls as for the Internet surfing they do.  The OECD found that in Spain the phone cost is US$20 out of a total cost of US$51 per month.  In Portugal the phone cost is US$28 out of US$87.  But in Mexico, the phone cost is almost US$65 out of US$95, which makes Mexico the most expensive of the 27 OECD countries in terms of the typical cost for Internet access!

Argentina has partially solved this problem by encouraging all Internet customers to use the special 0610 dialing code to gain 30% to 50% savings in their calls to ISPs.  This approach, using special ISP dialing codes to identify Internet calls, should be encouraged throughout Latin America.  While it is fair to charge by the minute, it is more equitable to corral ISPs into special area codes with discount rates, and perhaps higher quality lines, coupled with phone switches optimized for long-duration data calls.  But even in Argentina, 0610 users complain of frequent busy signals.

A second suggestion is to encourage the local telephone companies to adopt a flat rate option for local phone calls.  Failing that, perhaps the telephone companies can be convinced to cease charging by the minute after a call exceeds 30 minutes.  By that point, the revenue derived for the call greatly exceeds the cost of its completion, most of which is generated in the initial few seconds.  So a flat rate plan for 30+ minute calls is going to encourage Internet usage, because once people see they have been on 31 minutes, they will tend to remain online.  Meanwhile, people who talk on the phone will continue to run out of things to say to each other long before 30 minutes has elapsed.  And a flat rate for 30+ minute calls will not change that pattern.

A third suggestion for ISPs to consider is to simplify their rate plans.  Some ISPs are adopting a three tier rate plan scheme, calling them the Gold, Silver, and Bronze Plans, for instance.  The Gold Plan is usually priced at a flat rate for unlimited hours.  The Bronze Plan is usually for 5-10 hours of usage per month.  The Silver Plan is usually somewhere in between.  But some ISPs have six or seven rate plans, with different rates for time of day and day of week.  These are irksome.  In general, Internet access should be billed like cable TV: by the number of channels, not the minutes of usage.  People do not want to watch the clock while on the Internet any more than they do while viewing a favorite film or TV show.

A fourth suggestion is to emulate the COM, NET, ORG, GOV and EDU nomenclature used by most Internet hosts in North America, but to do so in a way that preserves the national identity of the Web and email sites.  For instance, in Brasil, Colombia, Ecuador, and Bolivia, most Internet hosts use the country code as the right-most element of the Internet address, and then use COM, NET, ORG, GOV or EDU as the next address element to the left.  For instance, this report is online at www.iabin.net where ORG is the designation for non-profit organizations.

This address structure encourages Internet users to regard the IABIN Web site as both part of the ORG domain and the Brasil domain.  If this were a commercial site, it might be located in COM.BR, or COM.CO, COM.EC, or COM.BO, as appropriate.  So users would regard it as a Brasilian, Colombian, Ecuadorian, or Bolivian part of the COM domain.  Since the COM and NET domains already contain roughly half of all Internet hosts, this addressing nomenclature fits neatly into what most users already believe to be the typical pattern of the Internet.  However, the national identifier to the far right also encourages Internet users to expect country-specific content, and to expect it to be in either Spanish or Portuguese.  For instance, a user would expect IBM.com to be an Internet address for IBM Corp. in the USA, presented in English.  However, the user would expect IBM.com.br to be in Portuguese, and IBM.com.co or IBM.com.ec to be in Spanish.  Therefore, this technique bridges the gap between the COM/NET/ORG etc. structure and the national domain structure.  The incidence of adoption of this second-level domain structure is examined in the document located at http://www.iabin.net/document/internet/sur-domains

The complete opposite of this approach also is happening around the world, where the right-most two-letter code that is designed to signify nationality is instead being used as a functional designation.  For instance, a British public relations company named Sidewinder currently operates a Web site at http://www.sidewinder.net.pr/ not because it is aiming its services at Puerto Rico nor because its staff speaks Spanish, but merely because it likes having the letters PR at the far right side of its Internet address.  If Montserrat, for instance, does not wish to make use of its MS national domain, they could conceivably sell it to Microsoft.  Colombia could rent its CO domain space to multinational companies such as Eastman Kodak Co. and General Electric Co.  However, this would be a most unfortunate reallocation of the national country code domain space, one whose distorting effects can most clearly be seen in Tonga (TO, as in go.to) and Turkmenistan  (T M, as in Trademark).

On the Latin American Internet, there is already a rich assortment of local content aimed at the local market.  However, all Spanish and Portuguese content worldwide is only a click away, with no difference in the cost of access.  There is no premium charged by most ISPs for access to foreign Web sites or email services.  There are major amounts of Spanish content available in Spain and Mexico, and Portuguese is the language of choice in Brasil and Portugal.

According to statistics culled from the Alta Vista search engine on a periodic basis over the past four years, there have been around 4.2 million pages published in those four domains from 1994 to 1999.  That represents around 2% of all Web pages published in the world.  However, even within the COM domain, there is some Spanish and Portuguese content.  Therefore, if extrapolation is permitted, perhaps another 2% of the content in the COM domain is written in Spanish or Portuguese.  And around 4% of the Internet is in one of these languages.

Table 7.1

Language Used on Web Pages in the COM Domain

January 1998

Language Used        Web Pages             Percent        

English                 1,322,001      77%   

German                26,607            1.5%

French                  25,845            1.5%

Spanish                25,613            1.5%

Japanese             23,930            1.4%

Italian                    12,733            0.7%

Chinese                8,827              0.5%

Portuguese         8,801              0.5%

Swedish               5,613              0.33%

Korean                 4,879              0.28%

Dutch                    4,623              0.27%           

Russian                2,042              0.12%           

Source: AltaVista http://altavista.digital.com

The entire Latin American region contains around one percent of the worldwide Internet.  Yet around two percent of the COM domain is written in either Spanish or Portuguese, plus another two percent of the national domains.

In other words, for the Spanish or Portuguese speaking Internet user, content is not a problem.  Language barriers are not a problem.  Around a third of Internet users in Latin America can read English.  But there is plenty of local content as well.  Based upon an informal survey of Web sites in Latin America, this content is every bit as sophisticated as any in Europe or North America.

Some examples:

There is a food market in Uruguay that sells groceries over the Internet and delivers them to the customer.  http://www.hipernet.com.uy

There is a pizzeria in Sao Paulo that takes orders for cooked meals over the Internet that the staff then deliver to the buyer. http://www.acbsav.com/chikapa/index.htm

There is an online shopping center in Chile at http://www.intermall.cl/IM/default.asp

One of seven known homebanking services in Brasil is operated by Banco do Estado de São Paulo S.A. at http://www.banespa.com.br/noticias/

A company in Colombia operates a service called “Ping Floyd”

http://www.imagine.com.co/atractores/pingfloyd/comentarios.htm which will monitor the health of its clients’ Web sites by periodically sending them a “ping” message and timing the round-trip delay.

There are radio stations that broadcast their programming over the Internet in Argentina, http://www.tournet.com.ar/indexnosound.html Suriname,  http://radio10.cq-link.sr/radio10live.htm

and Mexico. http://www.giga.com/~infopue/

Country-by-country notes on these innovative services are available in the file located at http://www.iabin.net/document/internet/sur-isps including the Web addresses and pricing schemes of some 215 ISPs.  Summaries of the Internet subdomain structures in the countries are listed in the file http://www.iabin.net/document/internet/sur-domains and a list of all the bookmarks gathered can be found in the http://www.iabin.net/document/internet/bookmark file.

All of the statistics for each of the 48 national domains in Latin America, which detail Internet host and Web page installed bases and Internet growth rates,  are contained in various Powerpoint presentations posted on the Web as follows:

·         ·         North America http://www.iabin.net/document/internet/norte.htm

·         ·         Mexico and Central America http://www.iabin.net/document/internet/central.htm

·         ·         Caribbean http://www.iabin.net/document/internet/caribe.htm

·         ·         South America http://www.iabin.net/document/internet/sur.htm

Finally, comparisons between the size of the national population and the size of the national Internet infrastructure in each of the 48 countries is detailed in charts located at http://www.iabin.net/document/internet/popgdp.htm on the IABIN Web site.  There are separate charts for comparisons with the population and with the national GDPs.  For instance, here are the charts for Brasil:

In these charts, it is apparent by the shape of the curve that the Internet is growing at a faster rate in Brasil than it is worldwide, because the slope of the curves is upwards, except for a brief downturn in mid-1997.   An upwards slope infers faster-than-average growth, while a downwards slope infers slower-than-average growth.

However, it also is apparent that the amount of Internet infrastructure in Brasil remains below the worldwide average, because the curves are located entirely below 1.0, and 1.0 is the worldwide average rate of diffusion for Internet infrastructure.

In other words, the current status of the Internet in Brasil is this: it is below the worldwide average in size but it is growing faster than average annual rates.  This also is the case in Argentina, Colombia, Mexico, Paraguay, and Venezuela.  The years ahead are certain to be exciting, as demand begins to catch up with supply, and as Spanish and Portuguese speakers continue to stake their claims within the Internet community.