Insights about Digital Transformation and ICT Opportunities for Brazil Report and Recommendations January 2019 | Edition nº 2
Insights about Digital Transformation and ICT Opportunities for Brazil
O conceito de Pricing ganha relevância no mundo dos negócios, ao se consolidar como uma prática de formação e execução de preços voltada para capturar o maior valor de cada cliente, abrangendo temas desde a estratégia à excelência comercial, com o objetivo de maximizar a lucratividade.
4 Insights about Digital Transformation and ICT Opportunities for Brazil
Contents
Preface 7
1. Executive summary 9
2. Investments in ICT improve a country’s economy and social welfare 13 Concept and definition of the ICT Sector The ICT sector in the world Impacts of the ICT development on economy, society and policy
3. Brazil is underperforming on ICT, therefore there are opportunities to improve competitiveness 29 Efforts to the development Digitalization experiences
4. Investments in priority areas can speed up Brazil’s development and address current gaps 37 On what sector/areas should Brazil focus?
5. Initiatives in infrastructure, education and public safety create the foundations for the Brazilian ICT development 41 1. 5G 42 2. Optical fiber 56 3. Cloud 65 4. Safe city 74 5. Talent 84
6. Final remarks 95
Appendix 96 Methodology Notes 97
5 With the honorable contribution of Insights about Digital Transformation and ICT Opportunities for Brazil
Preface
Brazil is a country with continental In order to incentivize the development of universities, industry, associations and dimensions, with a vast dispersion in the ICT sector in the country, the Ministry representations), and intends to bring a development parameters across regions. of Science, Technology, Innovation and neutral yet inclusive perspective that could Urban centers concentrate the most part Communication (MCTIC) established a MOU benefit the development of Brazil. of the population. Their financial situation with the high-tech company Huawei. Among enables them to reach out for mobile the requirements of the document, there Additionally, the study also addresses viable phones, broadband and education. In was the elaboration of a report related to the actions, propositions and cases that the contrast, rural areas and low-income ICT sector in Brazil, which would be a third Brazilian public and private sector can jointly neighborhoods of urban centers often party product from a consulting company collaborate, for the purpose of positioning fall behind in technological advances. hired by Huawei. Through an open call to the Brazil into the tier of countries that leveraged Inhabitants from these regions usually market, Deloitte won the RFP selection to the ICT infrastructure to enable new do not have or have limited access to conduct this work. business models and improve competitive technological advances, aggravating the advantage. social exclusion. Private companies do not Deloitte is proud to be part of this initiative have the financial motivation to invest in and to contribute with all its knowledge these areas, leaving these communities and experience for the benefit of Brazil. even further away from the benefits of the This report was written with the most digital world. independent and impartial view, based on internal analysis, market research and This perverse cycle can be broken. We hope interviews with different sectors of society to address viable considerations in order (government, public agencies, regulators, to overcome the limiting barriers of the Brazilian integration to the digital era.
The Brazilian government has already Márcia Ogawa conducted some studies and is placing a lot Craig Wigginton Matsubayashi of effort to improve the current situation Deloitte’s Technology, Deloitte’s Technology, Media of the country in terms of digitalization. Media and and Telecommunications The signature of MoUs (Memorandum Telecommunications leader in Brazil of Understanding) with high-technology global leader companies highlights this effort to promote knowledge exchange and learning through With the honorable support of practical experiences.
André Müller Borges Thiago Camargo Lopes Telecommunications Secretary for Digital Secretary of Brazil Policies of Brazil
7 Insights about Digital Transformation and ICT Opportunities for Brazil
“Telecommunications infrastructure is the foundation for a new digital economy. Investments in this sector generate intensive potential in economic activity, digital inclusion, and social welfare.”
André Müller Borges Telecommunication Secretary of Brazil
8 Insights about Digital Transformation and ICT Opportunities for Brazil
1. Executive summary
A lot of effort is being made by the governments to adapt and incorporate new technologies to digitalize the world.
Information technology and communications There are many gaps between supply and directives and assertions to simplify and are considered among the most important demand of skills across different sectors in modernize the public administration, as well topics in the digital era. New services, Brazil. The challenges of the ICT sectos, the as to enhance and improve public services enterprises, start-ups arise changing the way lack of adequate policy direction and the provided to society, ranking priorities and established companies drive the market. ICT slow pace in human capital development goals for the de-bureaucracy. The program brings a disruptive point of view for business programs have caused a widening in the also recommends the main targets for the models and daily tasks. existing gaps. The Brazilian government, new versions of the Digital Governance however, has been making efforts to change Strategy (Estratégia de Governança These changes demand the adaptation of the current situation. Digital – EGD). markets, companies and the government as well. In this way, a lot of effort is being made For instance, the “Brasil Eficiente” program The “Brasil Eficiente” program’s structure has by governments to adapt and incorporate (Efficient Brazil) has created the National 08 programs, including the Brazilian digital new technologies to digitalize the world. Council for de-bureaucratization to address strategy.
It is a challenge that is not restricted only to the government intervention. Both the Efficient Brazil citizens and the companies/enterprises play an important role in these changes towards 1 2 3 Interoperability a digital environment, encouraging the ICT of Gov Systems Brasil Cidadão Digital Citizenship Platform sector to create eminence in the global (GovData, ConectaGov (MP) (MP) context. e PREDIC) (MP) Specifically, in Brazil, the government has already conducted several studies and has 4 5 6 Projects of simplication of generated some reports taking into account the E-Health: e-SUS AB and Innovaton policies tax, social security and work challenges and gaps that need to be addressed scheduling of appointments, Connected Schools services for both enterprises to improve the ICT market and drive the country e-Citizen and e-Manager (MS) (MEC e MCTIC) and citizens towards a digital strategy. Associations and (MF, MDCI, MTb, MCid e MDS) other entities related to the ICT market are 7 8 also motivating the Brazilian market.
Brazilian Digital Strategy (EDB) Digital Work Identity (MTb) (MCTIC)
9 Insights about Digital Transformation and ICT Opportunities for Brazil
All initiatives under the “Brasil Eficiente” Therefore, the objective of this report is to program’s umbrella are strategic to the contribute to the knowledge base already country’s development. In terms of the developed by the government in order to ICT market, the Brazilian Digital Strategy, move Brazil onto a prominent position in the led by the Ministry of Science, Technology, global ICT and Technological scenario. Innovation and Communication (MCTIC, in Portuguese) stresses the importance The Brazilian digital strategy (e-Digital) is an of the sector to catalyze the economy and extensive study conducted and published other segments of the industry, as well by the MCTIC, where 100 actions for the as to improve the social well-being of the development of the digital country were population. presented in two axes - enabling axis and axis of digital transformation.
Enabling axis
Axis of digital transformation Actions foreseen
Data-based economy 6
World of connected devices 6
New business models 24
Citizenship and government 11 Infrastructure and access to ICT innovation and development Research, Trust in the digital environment Training Professional Education and economy dimension International
Total actions Actions foreseen 9 10 15 9 10 100
10 Insights about Digital Transformation and ICT Opportunities for Brazil
Considering all the government efforts The main objectives of the Brazilian digital strategy include (non-exhaustive): related to the digital strategy, this report •• Network infrastructure and •• International dimension. Examples: does not aim at replicating or discussing broadening Internet access. prioritizing integration processes, the work that has already been conducted Examples include expanding mobile including OECD, G20 and eLAC - Regional and developed. The main contribution of Internet access coverage to municipal Digital Market in Latin America; export this paper goes beyond, considering these districts without cell towers and bringing support for SMEs via marketplaces’ e-Digital initiatives as a starting point. high ‑speed terrestrial Internet to schools digital images. and rural schools. This report will not discuss each one of the •• Economical digital transformation: 100 actions in particular but it will prioritize •• Research, development and data based economy, a world of the most important aspects to the Brazilian innovation. One example is expanding connected devices and new business economy, justifying its importance and the connectivity of the cybernetic models. Examples: Expanding the relevance for the country. infrastructure (high-capacity Internet e-commerce, an activity that grows 12% and datacenters). per year, with R$ 50 billion in annual The report is structured as follows: revenue, and in which Brazil represents •• Trust in the use of ICTs. Examples: Section 1 describes and positions this 50% of the Latin American market. This Approval of a law on the protection paper considering the initiatives already represents a boost for SMEs in digital of personal data; definition of policies implemented by the Brazilian government. platforms and marketplaces - simplify and procedures for greater articulation Section 2 presents a worldwide overview of and streamline bureaucracy for digital between the Internet and the public the ICT sector highlighting the importance businesses. sector incident response centers. of the investments and the spillover effect •• Citizenship and digital government, of these investments over the economic and •• Education and professional in articulation with the strategy of social variables. In Section 3 we detail the training. Example: to improve initial digital governance and the platform ICT sector in Brazil, presenting analyses and and continuing teacher training for of digital citizenship. Example: comparisons between the present situation the use of technology; to include in partnerships with startups to provide of the sector in Brazil and in other countries. the basic education content, skills services to the citizen, based on the Section 4 describes which areas should and competences for the digital Open Data platform of the Federal be prioritized in the effort to develop and world; to reinforce in the High School Government. improve the position of the country in the the disciplines of the STEM group ICT sector. Section 5 describes in detail the (science, technology, engineering and framework of each one of the selected areas mathematics). and Section 6 presents the final remarks of this report.
11 Insights about Digital Transformation and ICT Opportunities for Brazil
“Brazil can be a strong competitor in the new digital economy. Our challenge is to create the infrastructure conditions to enable new business models.”
Thiago Camargo Lopes Secretary for Digital Policies of Brazil
12 Insights about Digital Transformation and ICT Opportunities for Brazil
2. Investments in ICT improve a country’s economy and social welfare
The Information and Communications The ICT sector is an enabler of economic progress Technology (ICT) sector is an enabler of economic progress and also an important and also an important driving force for the development driver for the future development of the of the global digital economy. global digital economy. It integrates the digital ecosystem, which is a global network of economic and social activities, such as the Internet, mobile and sensor networks. Content • Advertising • Movies and entertainment • Publishing, information, and news
Services Software • Diversified commercial and professional services • Application software (ERP, CRM, SCM, SaaS, etc.) • IT consulting and support services • Infrastructure software (virtualization, DBMS) • IT infrastructure services (include IaaS) • System software (includes OS and middleware) • Internet portals and platforms
Network Hardware • Alternative carriers • Communications equipment • Cable • Computer hardware • Satellite and broadband • Consumer electronics • Wireline • Electronic equipment manufacturers • Wireless • Electronic components and manufacturing services • Integrated telecommunication service • Network equipment • Mobile devices (handheld)
Source: Deloitte
13 Insights about Digital Transformation and ICT Opportunities for Brazil
The Digital Ecosystem can be defined as a of their complex interrelationships and second order (those that emerged from subset of the Telecommunication, Media their collective impact on a wide range of first-order trends). This categorization helps and Technology (TMT) companies that are customers. in understanding how one or more trends specialized in the development of hardware, enabled the emergence of another wave of content, and software applications and The trends that drive the evolution of a value creation in the digital ecosystem. provide a platform for the creation, digital ecosystem can be divided in three distribution, and consumption of content, clusters: foundational (trends that lead to applications, and services. These companies the emergence of others), first order (those Digital Ecosystems are part of the ecosystem by the virtue emerging from foundational trends), and trends Cluster 1 – Foundational CLUSTER 03 – SECOND ORDER Enabled the digital revolution. The Security across networks, Data and Analytics most recent concepts such as artificial devices, data, IT infrastructure intelligence and IoT are possible due to these capabilities
Cluster 2 – First order CLUSTER 02 – FIRST ORDER Key trends that gained prominence as Proliferation of Commoditization Everything Digitization direct beneficiaries of the foundational connected devices of hardware, as a service of the world and machines network and IT trends. Each of these factors continues to exert influence inside and outside the digital ecosystem
CLUSTER 01 – FOUNDATIONAL Cluster 3 – Second Order
Democratization Miniaturization and Broadband, IP, and Emerges from the first order cluster of software computing power ubiquitous connectivity and reflects that companies within the digital ecosystem master the Source: Deloitte digitalized business environment.
The ICT sector and its impact on other industries
Production Retail Public Transportation Finance Healthcare Energy ••Factory ••RFID inventory ••E-governement ••Vehicle tracking ••Braking and ••Healthcare ••Smart meters automation tracking applications systems payment management and networks ••Remote silo ••Inventory ••Information ••Fleet route systems systems management management security optimization ••Online ••Remote health ••E-procurement POS systems ••Defense transactions check Productivity
Financial Innovation Public Services Consumer Production Trans Competitiveness port ation Energy Health Sustainability Retail Care Whosale Construction Tourism and Areasand Utilization of Industries ICT using based solutions
Information and Communication Technology (ICT) Sector Industries
Hardware Software IT Services Communication Telecommunications Computers, servers, Operating system, IT planning, design Fixed Voice Access, Equipment hosting systems, etc, ERP, special developement, xDSL and FTTx Network equipment, application packages, implementation, broadband, mobile PBX, routers, value-added services, maintenance, etc, voice and data telephone, devices, etc. communication, etc IPTV, etc
Source: Deloitte Note: The circumference size is an illustrative representation of the macro effects generated by ICT in each sector, through productivity gains, innovation, increased competitiveness and sustainability.
14 Insights about Digital Transformation and ICT Opportunities for Brazil
In this way, the ICT sector is seen as the the ICT is divided into the manufacturing and become the major driver of the ICT sector, foundation to the development of technology the service segments with specific economic with broadband Internet access being a and innovation. It’s a horizontal sector which activities in each one of them. crucial resource for accessing information. affects all industries, increases productivity, and takes an active role as a facilitator. The ICT sector in the world The mobile-cellular subscriptions The boom of the ICT sector during the penetration in the ICT sector in 2016 was Concept and definition of the ICT Sector last decade is especially related to the significant. Mobile-broadband subscriptions Some entities define the ICT sector development of the telecommunications and access to the Internet, which have considering different perspectives. The technologies that have revolutionized the become fundamental indicators for the Organization of Economic Cooperation regular means of communication and access digital economy evolution, have presented and Development (OECD) pioneered the to information. Improved connectivity has high representativeness in the developed discussion of the activities that compose economies. the ICT sector. In 1998, the OECD defined the ICT sector as a combination of both ICT Sector manufacturing and services industries1 that capture, transmit and display data and Manufacturing Services information electronically. It was the first Electronic Components step in obtaining initial measurements of the Electronic Components ICT sector core indicators. Computer Equipment and Peripherals
In Brazil, the Brazilian Institute of Geography Equipment Communication Computer Equipment and Peripherals and Statistics (IBGE) defines the ICT sector Apparatus for Reception, Reproduction, Recording and Amplification of Audio and Video as the integration of technologies based on Virgin Media, Magnetic and Optical microelectronics, telecommunications and Virgin Media, Magnetic and Optical information. Considering the classification of Source: National Classification of Economic Activities (CNAE), IBGE; International Standard Industrial the economic activities (“CNAE”, from IBGE), Classification (ISIC), United Nations.
140 ICT penetration by level of development, 2016 130 120 110 100 90 80 70 60 50 40 30 Per 100 inhabitants/households 20 10 0 Fixed-telephone Mobile-cellular Fixed Mobile- Households Households Individual subscriptions subscriptions broadband broadband with with using subscriptions subscriptions a computer Internet acess the internet
World Developed economies Developing economies LDCs
Source: ITU,2016. (Data are estimated)
15 Insights about Digital Transformation and ICT Opportunities for Brazil
There is a long-term upward trend in the Global ICT developments, 2001-2017* availability of the telecommunications 100 services and broadband. Between 2007 and 2017, global fixed-broadband subscriptions increased by 183 per cent. Active mobile- 80 broadband subscriptions grew rapidly, from 4.0 subscriptions per 100 people in 2007 60 to an estimated 56.4 subscriptions per 100 people in 2017. 40 According to the International Telecommunications Union (ITU), after 20
2005 it is possible to see an upsurge in Per 1000 inhabitants mobile-cellular telephony, leading to 0 near-saturation penetration rates. 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 At the same time, global fixed-telephone Mobile-cellular telephone subscriptions subscriptions have been decreasing Fixed-telephone subscriptions worldwide since 2005, becoming more Individuals using the Internet and more obsolete, reflecting the growing Active mobile broadband subscriptions importance of mobile phones. Fixed broadband subscriptions
The following charts show global mobile Source: ITU cellular subscriptions and global fixed- *ITU estimate telephone subscriptions, total and per 100 inhabitants, 2005-2017.
16 Insights about Digital Transformation and ICT Opportunities for Brazil
Mobile-cellular subscriptions (millions) 105 100 95 92 89 87 82 7,500 78 7,200 7,000 6,800 70 6,500 6,100 60 5,900 5,100 52 4,400
40 4,000
30 3,300
2,800
2,100
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Subscriptions in millions Per 100 inhabitants
Source: ITU Measuring the Information Society Report, 2017 – Volume 1
Global fixed- telephone subscriptions (millions)
18,6 18,4 18,3 18 18 17,5 17 16,3 16
1,230 1,240 1,325 1,235 1,200 15 1.180 14,5 1.170 1,130 14 1,130 1,090 1,050 13 1,000 980
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Subscriptions in millions Per 100 inhabitants Source: ITU Measuring the Information Society Report, 2017 - Volume 1
17 Insights about Digital Transformation and ICT Opportunities for Brazil
Given the growing importance of the mobile Smartphone adoption is projected to grow telecommunications services, the mobile by 20% between 2017 and 2025, driven Internet adoption has become the key by more affordable devices and a higher metric for evaluating the performance of demand for access to different online the ICT industry worldwide. In 2017, 43% services and contents. Smartphones are of the population had access to mobile expected to become the leading type of Internet, while the forecast from GSMA for handset by 2025 in all regions around the 2025 is that the mobile Internet penetration globe. Brazil will be among the five major will reach 61%, i.e. about 5 billion people smartphone markets by 2025, with 200 around the world will be mobile Internet million mobile connections, along with users. China, India, the US and Indonesia.
Smartphone adoption Smartphones as a percentage of total mobile connections excluding cellular IoT (in %) 91
81 80 Top five 76 77 77 75 73 smartphone 70 68 markets (2025)* 61 China 57 57 55 1.4bn 52 India 1.0bn
34 US 350m Indonesia 320m Brazil 200m
North Europe Latin Asia-Pacific Global CIS MENA Sub-Saharan * By installed base; America America Africa country level; aproximate figures 2017 2025
Source: GSM Association
18 Insights about Digital Transformation and ICT Opportunities for Brazil
Brazil will be among the five The growing importance of mobile Considering the mobile network technology, telephony demands improvements in 2017, 29% of the global mobile major smartphone markets in service-providing, especially for connections were based on the use of by 2025 with 200 million developing countries, raising challenges 4G technology, according to the GSMA. in the expansion and an upgrade of the In 2019, about 10 years after its launch, mobile connections. existent network. Investments in services, 4G is projected to become the leading infrastructure and network became strategic mobile network with more than 3 billion to market expansion and sometimes they connections worldwide and will continue to need assistance from the government, dominate until 2025, reaching a 53% share particularly for non-profitable areas. of mobile connections.
Global mobile adoption by tecnology The global leaders in the growth of the 4G Share of mobile connections excluding cellular IoT technology are the developing economies (countries from Asia, Latin America, Middle East, North Africa and Sub-Saharan Africa), which will be responsible for 84% of the 53% 4G newly generated 4G connections around the world in the next eight years.
China, the US, the European 29% 3G Union and Japan will lead the 5G technology adoption by 2025, and will be 14% 5G responsible for 70% of the global 5G market. 4% 2G
Source: GSMA
19 Insights about Digital Transformation and ICT Opportunities for Brazil
Regarding the development of the 5G the ICT sector. The growing demand for new technology, the GSMA estimates that in 2025 services – i.e. streaming music and videos there will be 1.2 billion connections in the services – requires increasing improvements world, accounting for 14% of the total mobile in network in order to meet the consumer’s SIM cards. expectations related to the quality and the speed of the connection. Developed countries are already engaging in commercial launches of 5G conducting trials The number of individuals using the using various spectrum bands. The GSMA Internet is growing, driving the development estimates that China, the US, the European of the global ICT industry and becoming Union and Japan will lead the 5G technology an important resource for accessing adoption by 2025, and will be responsible for information. Since 2005, the number of 70% of the global 5G market. individuals using the Internet has been increasing, especially in Europe and the The fixed Internet broadband, along with Americas, according to the International mobile telephony, plays a relevant role in Telecommunication Union (ITU).
Individuals using the Internet (in %)
100
80
60
40
20
0 2005 2010 2015 2017 Africa Arab States Asia & Pacific CIS Europe The Americas
Source: ITU, Measuring the Information Society Report – 2017 Volume1.
20 Insights about Digital Transformation and ICT Opportunities for Brazil
The proportion of households with access The existing gap between developed and to the Internet is also unequally distributed developing economies in terms of fixed across different countries. broadband subscribers is rather prominent with 31 subscriptions per 100 inhabitants In developed countries, 84.4% of the in the developed world against 9 in the households have Internet, while in the developing world. The reason for this large developing economies this percentage is gap lies in the considerably more expensive twice as low (42.9%). fixed broadband, especially in the Least Developed Countries (LDCs)3. During the last five years, the number of fixed broadband subscriptions around the world has grown at a CAGR2 of 9%, with an addition of 330 million new subscribers.
Proportion of households with Internet access, 2017* (in %)
84,2 84,4 70,4 65,3 53,6 18,1 47,2 42,9
18 14,7 CIS LDCs Africa Africa World Europe Developed Developed Developing Arab States States Arab Asia & Pacific The AmericasThe
Source: ITU *Estimated CIS refers to the Commonwealth of Independent States.
Growth of fixed-broadband subscription, Fixed-broadband subscription, 2017* CAGR, 2012-2017* (in %) (per 100 inhabitants)
World 12 World 13
Developed 5 Developed 31
Developing 13 Developing 9,5
LDCs 40 LDCs 1
Source: ITU *Estimated CAGR refers to the compound annual growth rate.
21 Insights about Digital Transformation and ICT Opportunities for Brazil
Considering the importance and relevance Gartner’s forecast for 2018 worldwide dollar-valued IT spending of the ICT sector in the economy, the investment for the sector is crucial for its development. According to a Gartner study, 4500 the 2018 worldwide spending on ICT will +3.0% +3.0% reach more than USD 3.5 trillion, 4000 +2.8% +2.8% registering a 6.2% annual growth. The +6.2% +3.8% figure also highlights the importance of 3500 the communication services among worldwide spending. 3000
2500 The International Data Corporation (IDC) estimates that in 2018 the United States are 2000
expected to be the major investor within $ US Billions ICT, spending USD 1.3 trillion. They present 1500 a projected growth at a CAGR of 3.6% over the period 2016-2021. China will be the 1000 second major geographical market for ICT, with an investment of USD 499 billion in 500 2018 and a significant growth of 5.2% CAGR through 2021. Japan, the United Kingdom 0 and Germany will be among the top five 2016 YR 2017 YR 2018 YR 2019 YR 2020 YR 2021 YR 2022 YR countries in ICT investment in 2018, while Data Center Systems the fastest growing spending between 2016 and 2021 will be observed in the Philippines Software (7.5% CAGR), India (7% CAGR), and Peru Devices (6.7% CAGR). Peru’s position can be partially IT Services explained by the purchase of smartphones Communications Services and investments in hardware. Source: Gartner
22 Insights about Digital Transformation and ICT Opportunities for Brazil
Even though the global digital economy is however, especially the Least Developed evolving at a rapid pace, there is a significant Countries (LDC), are not adequately disparity among the development of the ICT prepared to face the changing global digital sectors in different countries around the environment and to benefit from the existing world. Some countries have quickly adapted opportunities related to the digitalization to the new reality, enhancing their digital processes. transformation. Many developing countries,
Some examples from the experience of other countries in the context of digital transformation
Singapore: Singapore Smart Nation was Malaysia: Digital Malaysia is a program launched by the government in 2014. based on strategic trusts to advance the The objective was to drive the country towards a developed digital comprehensive adoption of digital and economy by 2020. The goals are to smart technologies throughout the increase the contribution of the digital country. The government puts policies economy to the Gross National Income and legislation in place to facilitate (GNI), to enhance productivity and to innovations by the public and the improve the standard of living. private sector and to encourage the adoption of new ideas. Germany: Industry 4.0 is a national strategic initiative from the German Canada: Digital Canada 150 was also government. It aims at driving the digital launched in 2014 with the objective to manufacturing forward by increasing create a digital policy for Canada. It set digitalization and interconnection of goals for the celebration of Canada’s products, value chains and business 150th birthday in 2017, and they were models. It also aims at supporting updated when the date got closer. The research, networking of industry new version of the program focused on partners and standardization. five pillars: Connecting Canadians, Protecting Canadians, Economic China: Internet+ (Internet Plus) was a Opportunities, Digital Government and program implemented through a Canadian Content. five-year plan to integrate cloud computing, big data and the Internet of Things with a variety of industries from manufacturing to commerce, Internet banking, agriculture and many others.
23 Insights about Digital Transformation and ICT Opportunities for Brazil
th Brazil ranked on 44 The Global Connectivity Index (GCI) At the same time, the improvement of the place on GCI, among the highlights the importance of the ICT GCI score leads to significant economic sector and analyzes how the countries are gains: an increase of 1 point on the GCI score 79 examined countries for positioned in terms of investment, adoption, generates a 2.3% increase in productivity, a the second consecutive experience and potential ICT development. 2.2% rise in innovation and a 2.1% growth in national competitiveness. year and was classified as The US, Singapore and Sweden remained the an adopter. top three nations in 2018 (with 2017 data), according to the GCI ranking. Brazil ranked Global Connectivity on 44th place among the 79 examined countries. The country was classified as Index (GCI) an adopter and, as such, should focus on developing the implementation of cloud The Global Connectivity Index (GCI) is services across the entire economy, which a tool for measuring a country’s can open the door for earning a frontrunner4 status in ICT investment, adoption, status in the coming years. experience and potential of ICT. In 2018, the report analyzed 40 When the GCI report compares the evolution indicators from 79 different nations. from 2015 to 2018, it reveals that, on The countries were classified in three average, frontrunner countries advanced main categories: starters, adopters more than the adopters, which in turn and frontrunners. advanced more than the starters. The starters category refers to countries in the early stage of ICT infrastructure with focus on increasing the access to the digital economy. The adopters are countries focused on increasing ICT demand to GCI S-curve, 2015 and 2018 boost industry digitalization and economic growth. The frontrunners are the nations focused on improving Starters Adopters Frontrunners user experience, using technologies 80K +2.4 +5.2 +6.0 like Big Data and IoT to develop an 26.6 29.4 40.0 45.2 60.0 66.0 intelligent society. 60K The potential future gains (or losses) related to the development (or the lack of such) of the ICT sector differ 40K across countries and regions. They depend on the preparation of
Nominal GDP per Capita (US$) governments and adaption of 20K enterprises to the new reality and to cope with various challenges and costs.
25 35 45 55 65 75
GCI 2018 S-curve GCI 2015 S-curve Cluster averages Source: Global Connectivity Index (GCI), 2018..
24 Insights about Digital Transformation and ICT Opportunities for Brazil
Improvements in the ranking position are directly related to the development of the Induced ICT sector. This report will present some suggestions in the next chapter that will help Impacts of consumer purchases in directly and Brazil move up on the GCI’s ranking. indirectly affected sectors Indirect Impacts of ICT development on Impacts on other sectors and industries economy, society, and policy The development of the ICT sector and the Direct process of digitalization have direct and indirect impacts on the economy, on the Impacts of the value added of the ICT sector society and on the government policy. When it comes to the economy, the ICT sector can contribute to the GDP growth, create new jobs, boost the process of innovation and Source: Deloitte the adoption of new technologies, as well as lead to increases in productivity. Digitalization The direct economic impacts can be estimated by measuring the contribution of the value added of the firms operating in the ICT sector to the economy, while the indirect economic impacts are related to the purchases of inputs from different providers Economy Social Policy in the supply chain.
Regarding the gains for the society, the increased levels of digitalization of the Political economy can lead to higher social inclusion, GDP Growth Inclusion development and equality and better life quality. Moreover, participation the ICT sector can boost the political development of the country, enhance the efficiency of the public administration and increase the transparency and diminish the Employment Equality Efficiency bureaucracy.
Innovation Life quality Open Data
Access to basic Productivity Transparency services
Source: Mexico National Digital Strategy, 2013
25 Insights about Digital Transformation and ICT Opportunities for Brazil
Concerning the representativeness of the Outlook to 2022, value added ($ billion, % of GDP) 50% ICT sector in the global GDP, The Mobile 49% Economy 2018 report from the GSMA 48% estimates a continuous expanding in the 47% next five years. The GSMA also concludes 46% that the biggest impact of the development 45% of the sector will be on productivity, due to the adoption of new technologies and 2,840 Internet solutions that would lead to more 2,660 2,480 efficiency and higher productivity. 2,310
2,010 2,160 Given the increase in the representativeness of the ICT sector in GDP, this sector becomes an important driver for global GDP growth and prosperity. Traditional ICT spending, which refers to investment in IT 530 550 490 500 520 520 and telecom services, has been significant during the last decade, registering twice as higher growth rates as the real GDP. 1,100 1,150 1,170 1,190 1,220 1,260
Between 2007 and 2017, traditional global ICT spending and real GDP growth exhibited similar behavior5. 2017 2018 2019 2020 2021 2022 Mobile Ecosystems Indirect Productivity % of Global GDP It is possible to observe a significant increase in ICT spending after the global financial Source: The Mobile Economy, 2018, GSMA crisis of 2008-2009 and also a considerable increase in real GDP growth. After 2015, investments in new ICT categories – such as Worldwide ICT Spending Internet of Things (IoT), robotics, augmented Growth, constant currency (in %) and virtual reality, cognitive computing and 8 artificial intelligence (AI) – gained importance Innovation accelerator driving ICT industry revenue back to more than 2x GDP in the developed world and are considered 7 as innovation accelerators. Investments 6 in these new technologies are expected to drive the growth of ICT spending in the 5 developed countries over the next years, 4 while investment in traditional ICT activities will be the major driver of the sector in the 3 developing world. 2
1
0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 -1
-2
-3
Including Innovation Accelerator Traditional ICT Spending Real GDP Source: IDC
26 Insights about Digital Transformation and ICT Opportunities for Brazil
Contribution to labor productivity growth in developed economies (in %) Investments in the ICT sector are also associated with increases in labor 5 Labor quality productivity. In the developed world, ICT capital had a significant positive impact on 4 TFP labor productivity between 1991 and 2000. ICT capital 3 Afterwards, this impact started decreasing Non-ICT capital and became rather small after 2011. This is 2 Labor expected once the level of development of productivity the domestic ICT sectors in these countries 1 achieves maturity.
0 The situation looks different for countries from the developing world, where the -1 1991 2001 2011 1991 2001 2011 1991 2001 2011 potential for the development of the 2000 2007 2016 2000 2007 2016 2000 2007 2016 domestic ICT sector remains prominent. -2 United States Japan Western Europe
Source: United Nations The ICT capital in East Asia has become the second major contributor to labor productivity growth after non-ICT capital between 2011 and 2016. In countries from Contribution to labor productivity growth in developing regions (in %) Africa, Latin America and the Caribbean, 7 on the other hand, the contribution of ICT capital to labor productivity growth 6 remains insignificant, which indicates the existing possibilities for investment in digital 5 technologies in these countries and the 4 potential for boosting the performance of the domestic labor market. 3
In this way, it’s possible to see the 2 importance of the ICT sector for the 1 economy and its possible effects. All over the world this sector is playing a significant 0 role as an enabler of the digital ecosystem, 1991 2001 2011 1991 2001 2011 1991 2001 2011 1991 2001 2011 increasing its representativeness in GDP -1 2000 2007 2016 2000 2007 2016 2000 2007 2016 2000 2007 2016 yearly. However, the development of the -2 East Asia South Asia Latin America and Africa ICT sector in Brazil faces a lot of challenges the Caribbean that need to be addressed. Source: United Nations
27 Insights about Digital Transformation and ICT Opportunities for Brazil
“Integration and collaboration between Private sector, the Federal Government, States and Municipalities is fundamental for the expansion of the Brazilian technology and communications ecosystem. Strengthening the network among professionals in these sectors is a way of accelerating bureaucratic processes.”
Marcio Iorio Aranha UnB
28 Insights about Digital Transformation and ICT Opportunities for Brazil
3. Brazil is underperforming in ICT, therefore there are opportunities to improve competitiveness
Given the importance of the ICT sector According to the World Economic Forum worldwide and its trends to continue and (WEF), through the Global Competitiveness amplify its representativeness in global GDP, Report (GCR) from 2017-2018, Brazil is this section aims at presenting the Brazilian the best country in terms of market size, situation of the sector and how the country one of the twelve pillars analyzed by WEF. is positioned in comparison to the rest of the However, regarding other pillars from the world. ICT sector such as technological readiness and innovation, Uruguay and Costa Rica, are respectively the best and second best countries in Latin America.
GCI score range for Latin America and the Caribbean (LAC) across the 12 pillars, 2017-2018 edition
Hong Kong Norway Finland China Luxembourg 7 SAR Singapore Finland Panama Costa Rica Singapore Switzerland New Switzerland 6 Zealand Brazil Switzerland Uruguay Chile
Panama Chile Panama 5 Uruguay Costa Rica Jamaica
Costa Rica 4
3
2
1
Best global Best LAC Average LAC Median LAC Worst LAC 0 l l t t y s n d et et et er ss ia ze ns on on ca ar io en en es ncy ncy n & n si ti ti rk rk rk ture io ning
gi gh ne at ie ie in io im ai va ca si ut lo nomic et th an pm nm Hi ma ma nanc ma at fic fic ti uc it tr ad pr al truc rk lo r co s Fi no ro no Bu is st ef ef uc re ed vi as In ve He oe In bo ch od Ma ph ed en cr de La Te Infr so Go Ma
Source: World Economic Forum based on GCI 2017-2018
29 Insights about Digital Transformation and ICT Opportunities for Brazil
The WEF’s competitiveness index also ICT penetration in Brazil and the Americas (in %) 91 lists the main problematic factors for businesses. For Brazil, tax rates, restrictive labor regulations, corruption and inefficient government bureaucracy were the main 64.9 66.2 barriers listed in the World Economic 63.3 64 59.7 Forum’s Executive Opinion Survey. 51 52.4 Similar to other sectors, the ICT also faces difficulties and barriers for its development in Brazil. Even though it has one of the major telecommunications markets, Brazil needs to improve the connectivity and services. According to the ITU in the Measuring the Information Society Report 2017, Brazil has a dynamic telecommunications market that is % of households % of households % of individuals International in expansion. with computer with Internet using Internet bandwidth per access Internet user (kbit/s) The numbers presented by the ITU Brazil The Americas (North, Central and South) compares the Brazilian numbers with The Source: World Economic Forum Americas’ (North, Central and South America countries). It is possible to identify that the (in %) percentage of households and individuals Voice and data services revenues in Brazil with access to the Internet in Brazil is lower 74,4 than the regional average. Thus, there is still 68,9 space for development of the domestic ICT sector in the country. 62 59,2 Regarding the Telecommunications sector, specifically mobile telephony, net revenues 50,6 of data services surpassed the revenues of voice services in 2017, according to Teleco6. 49,4 40,8 Mobile telephony is Brazil’s largest ICT 38 subsector, accounting for 43.5% of the 31,3 sector’s gross revenues in 2017 and for 72.9% of subscribers. Also in Brazil, 24,6 gross revenue from mobile telephony services reached 98.9 billion reais, which 2013 2014 2015 2016 2017 demonstrates the increasing potential of this market. Voice services revenues Data services revenues Source: Teleco
30 Insights about Digital Transformation and ICT Opportunities for Brazil
The net revenue of mobile data reached According to Teleco (2017) the number of 4G In terms of investment in the domestic 62% in 2017, demonstrating that Brazilian users continues to increase in Brazil, which mobile industry, it registered a peak in 2001 consumers are demanding more services indicates that operators are still monetizing as a result of the boom in the use of mobile regarding data, which increases the their investments in the 4G infrastructure. phones. Afterwards, there was a slowdown relevance of broadband expansions and As a result, the amount of users is expected in the investment in the sector, followed by a coverage. These changes in consumer to keep increasing for the next years, wave of capital entry in the mobile industry, behavior highlight the importance of especially with new technologies like the 5G starting in 2011 with the boom in the use of the development of a consistent mobile that will provide high-speed connections smartphones around the globe. broadband infrastructure to meet demands between numerous devices. and provide services with high quality to consumers. Revenues from voice services Mobile technology in Brazil (million R$) have been reducing since 2013, which can be justified in parts by the emergence 200 196 of text message services through data 178 157 160 usage (i.e. WhatsApp, Telegram, etc). These 145 149 134 numbers reinforce the hypothesis of the 119 intensive services data in Brazil. 95 95 113 102 66 84 52 60 Considering the mobile technologies in 33 Brazil, 4G has been increasing its share since 15 25 48 32 2 4 1 7 2013 and became the leading technology surpassing 3G for the first time in 2017. 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Significant investment in expansion of the 2G (GSM) 3G 4G 4G and 4.5G coverage across the country is Source: Teleco. Analysis of the Brazilian Mobile market, 2017. expected in the next few years.
Investments and their relation with gross fixed capital formation, 2016
35 12
30 10
25 8
20 6 15
4 10
5 2
0 0 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Investment, R$ billion Gross fixed capital formation, % Source: TeleBrasil
31 Insights about Digital Transformation and ICT Opportunities for Brazil
th Despite the growth of investments after detachment of Brazil in comparison to Brazil ranked in 5 2011, the Gross Fixed Capital Formation - other countries regarding the effort in place with 40.6% of the that measures the value of acquisitions of digitalization and innovation. new fixed assets that are used to produce unconnected population other goods7, indicates whether the Even though Brazil has a relevant mobile in 2016. country’s production capacity is growing market, the country was considered among and also the future confidence in the sector the top 10 unconnected markets in terms – was almost flat during the period. of absolute subscribers in 2016, according The competitiveness of the domestic ICT to the ITU. These top 10 countries account sector depends on the country’s capability This behavior indicates that the companies for 61% of the unconnected people in the to produce and export high-technology from the ICT sector are not actually investing world. Brazil was positioned in 5th place products. Brazil’s intensity in high-tech in increasing production capacity. The lack with 40.6% of the unconnected population manufacturing exports (13.5% in 2016) is of expansion can result in a significant in 2016. below the average for the OECD countries (17.6%). In addition, Brazil falls significantly Top 10 unconnected markets behind China in terms of export of high added value products. Among the countries Top Ten Markets Unconnected Score % Unconnected analyzed by the Economic Forum, China (millions) (millions) (penetration) is one of the countries with the largest 1 India 660.19 1,334.66 49.05 representativeness in the exports ofhigh- 2 China 362.28 1,385.28 23.06 tech products. 3 Nigeria 101.68 189.41 53.7 4 Pakistan 101.12 194.79 51.9 Increases in the share of exports of high value-added products are crucial for the 5 Brazil 85.35 210.41 40.6 future development of the ICT’s sector, and 6 Bangladesh 75.73 163.87 46.2 are directly related to skilled labor, which, in 7 Ethiopia 68.45 103.10 66.4 turn, generates greater value added for the 8 Indonesia 64.45 262.05 24.7 country’s economy. 9 United States 61.88 325.30 19.0 In this way, the characteristics of a country’s 10 Congo, Dem. Rep 59.93 80.98 74.0 workforce affect the level of technological Source: ITU, 2016 development. High-skilled people are a key factor for the processes of innovation and digitalization of the economy. Brazil remains among the countries that rely significantly on low-skilled labor with low productivity potential. According to the WEF’s estimation for 2016, only 21.6% of the population was employed in highly knowledge-intensive jobs. Within the Latin American countries, Brazil falls behind Argentina and Chile.
32 Insights about Digital Transformation and ICT Opportunities for Brazil
Share of high-technology products, 2016 or latest observation 35
30
25
20
15
10
5
0 s g d m Italy Chile India Israel Spain Brazil Japan China France Turkey Poland Ireland Greece Mexico Iceland Estonia Canada Norway Sweden Belgium Portugal Hungary Australia Germany Denmark Argentina Indonesia Korea, Rep. Switzerland South Africa Luxembour New Zealan United States CzechRepublic Slovak Republic OECD member United Kingdo Russian Federation Source: World Economic Forum, 2016.
Share of knowledge-intensive jobs in the workforce, 2016 (%) 70
60
50
40
30
20
10
0 n m LAC Italy Chile Israel Spain Brazil Japan China OECD France Turkey Poland Ireland Austria Greece Mexico Iceland Estonia Finland Canada Norway Sweden Belgium Slovenia Portugal Hungary Australia Germany Denmark Argentina Indonesia Korea, Rep. Switzerland South Africa Netherlands Luxembourg New Zealand United States Czech Republic Slovak Republic United Kingdo Russian Federatio Source: World Economic Forum, 2016. 33 Insights about Digital Transformation and ICT Opportunities for Brazil
In 2016, only 21.6% digital multinationals originated in North According to the Doing Business Report America and Asia, indicating a high level of of 2018, from the World Economic Forum, of the Brazilian workforce geographical concentration of the global which evaluates how easy it is to start performed highly digital economy. new business in each respective country, Brazil figures below the Latin American knowledge-intensive In comparison to Asia and North America, and Caribbean average, ranking in the jobs. Europe has fewer players on the global 125th position with 56.45 points, while the market but Latin American and African mentioned region’s average is 58.66 points. countries are lagging behind, accounting for The Doing Business indicator covers 11 Increasingly, companies seek skilled only 2% of the total market capitalization sets of quantitative regulatory indicators workforce to integrate and develop a digital value of digital companies around the world, to open a business: dealing with building ecosystem. Efforts are needed in this sense according to the United Nations Conference permits, obtaining electricity, registering for decreasing the gap between the actual on Trade and Development (UNCTAD). Brazil property, obtaining credit, protecting and the future workforce generations, since lacks high-tech companies that generate minority investors, paying taxes, negotiating high skilled professionals generate more high-value products, which makes it difficult across borders, enforcing contracts, and value for the country. for the country to compete on the global resolving insolvencies. They evaluate the digital market. distance to the frontier (DTF), which shows Domestic technological development and innovation are also enhanced by the presence of high-tech firms that Brazil lacks high-tech companies that generate generate high-value products. The graph below presents the majority of high-value products.
Geographical concentration of headquarters of “digital MNEs” with a market capitalization of more than $1 billion, by region, 2016
North America Asia Europe Africa & Latin America
63 42 27 3 $2.8 trillion $670 billion $161 billion $61 billion
Source: UNCTAD
34 Insights about Digital Transformation and ICT Opportunities for Brazil
the distance of each economy to the research communities from Europe and IT as a strategic asset for delivering better “frontier” represented by the best observed Latin America; programs and services that bring value to performance in each of the indicators in all the citizens. The proposed strategy has four •• National Plan of Internet of Things (IoT): the economies analyzed since 2005. major goals – service, security, value and directives to the implementation of agility and is based on the development public policies related to the sector’s In the report, the WEF concluded that Brazil of four key areas: Service IT (promotes the development; has reduced the average time consumed use of cloud computing and information- to start a new business by implementing •• National Strategy of Science, Technology sharing platforms), Security IT (focuses an online portal for commercial licenses. and Innovation (ENCTI) 2016-2022: states on reduced exposure to cyber threats However, the country also hindered the the robust and articulated National System and the adoption of proactive measures), process to start a business by reducing the of Science, Technology and Innovation Manage IT (related to strengthening the opening hours of business registration. (SNCTI) as an essential condition to the governance approach), and Work IT (seeks Some taxes related to the transfer of scientific and technological development; actions for building high-performing IT ownership were also high, compared to workforce and a modern workplace). Some •• Telecentros: public places with free the previous year’s analysis, indicating of the actions that are already underway in Internet connection and ICT tools, that transferring the ownership became Canada include the development of digital available computers connected to the more complex. Brazil also introduced a policy, the adoption of cloud services, the Internet especially to training and capacity new certificate of good standing on labor complete consolidation and modernization building; debts, increasing the number of due of data centers, and the development of API diligence procedures. In addition, despite •• Electronic Government - citizen service strategy, among others. the initiatives to reduce bureaucracy, there (GSAC – Serviço de Atendimento ao are still barriers to start new business in the Cidadão): provides free broadband Germany’s Digital country. Internet connection to “telecentros”, Agenda 2014-2017: a schools, hospitals and health units, program in which the High skilled professionals, high tech- indigenous villages, border posts and German government sets out the digital companies, infrastructure and network quilombos; policy guidelines for achieving three core improvements are, among others, the objectives: growth and jobs, access and •• Internet for all (Internet para todos): challenges faced by Brazil and other inclusion, and trust and security. The program to connect more than 40 countries in the digital economy. This report Agenda will be implemented together with thousand municipalities that do not have presents some suggestions to help to put in all stakeholders involved in the process of Internet access. The coverage expansion practice some actions for Brazil, highlighting digitalization: businesses, social partners, will be promoted through GSAC. the improvements and developments that civil society and academia. Moreover, in are necessary for the digitalization of the 2016 the Federal Ministry for Economic Digitalization experiences country. Affairs and Energy (BMWi) introduced A lot of challenges arise when talking about the Digital Strategy 2025. It is a strategic new digital economy and ICT sector. Some Efforts for the development action program, which suggests measures countries have overcome the challenges Given the present situation of the ICT and policy instruments for the successful to promote their digitalization and the sector in Brazil, the government through digital transformation of the country. Ten development of the ICT sector. the Ministry of Science, Technology, areas of action were identified as enablers Innovation and Communications (MCTIC) for digital Germany by 2025. The focus is Considering these challenges and efforts, has developed a number of studies related establishment of gigabit fiber network, we present some examples regarding the to the digital strategy of the country. These cooperation with start-ups, regulation that implementation of a digital strategy by some efforts are reflected in some initiatives and stimulates investment and innovation, countries. consolidated in the e-Digital document. data security, modernized production Below are listed other examples of MCTIC and Industry 4.0, digital education at all Government of Canada initiatives in order to promote Brazil as a ages, and creation of a Digital Agency as a Technology Strategic connected country: centralized competence entity in the ICT Plan 2016-2020: a sector. •• Brazil-Europe submarine cable: a project strategic plan that sets out the four-year between Brazil and Spain to enable digital direction of the federal government, data traffic between the countries. The introduced in 2016. The plan aims at objective, among others, is to connect guiding federal organizations on the use of
35 Insights about Digital Transformation and ICT Opportunities for Brazil
“The development of the Brazilian information and communications technology is core to positioning Brazil in the new Economy.”
Moacyr Martucci USP
36 Insights about Digital Transformation and ICT Opportunities for Brazil
4. Investments in priority areas can speed up Brazil’s development and address current gaps
Some areas are strategic to the On what sector/areas should Brazil focus? In Brazil, the government has already development of a country, especially when Many studies were conducted highlighting placed a lot of effort to enable and start a talking about the digital era. They bring the importance of the ICT development digital transformation, encouraging the ICT innovation to all aspects of the society, in all countries and its possible economic ecosystem. Along with the “e-Digital”, the affecting from citizens’ daily activities to and social impacts. In 2009, the World National Plan of Internet of Things (IoT) from huge companies’ business models. Given Economic Forum pointed the ICT sector as the National Bank of Economic and Social the ICT sector behavior and the digital a catalyst to the economic transformation. Development (BNDES) is another example, Slogan: “Internet of things: an action plan for Brazil” environment in the world, Brazil is far from The WEF’s report assigned a vital role to the besides many other studies conducted the most developed countries when talking ICT sector in the creation of a sustainable by the government to drive the country about the development, improvement and global economy, drawing attention to the towards the digital agenda. innovation in the ICT sector. challenges of the ICT ecosystem.
New technologies will drive competitiveness and can improve the development of the country, positively affecting its economy, workforce, and other social and economic variables. This kind of conclusion raises a lot of doubts and questions related to the main areas or dimensions that should be prioritized in “Internet of things: an action plan for Brazil” this new economical context. The National Plan of IoT is a study and horizontal; elaboration of an action conducted by the BNDES and the plan (2018 - 2022); and details of the Ministry of Science, Technology, main initiatives of the action plan. Innovation and Communications (MCTIC) which aimed at reaching a The national plan created an aspiration diagnosis and proposing public policies for Brazil, in order to accelerate the about the Internet of Things in Brazil. implementation of the Internet of Things (IoT) as a tool for sustainable The study contemplated the following development, especially regarding themes: general diagnosis and smart cities, health care, agriculture aspiration for Brazil; selection of vertical and industries.8
37 Insights about Digital Transformation and ICT Opportunities for Brazil
Considering the importance of the ICT 5G: Safe City: sector for the Brazilian development and It is considered a disruptive technology Technology may be responsible for taking into consideration the government’s that will enable new ecosystems such as multiplying surveillance, communication, effort to enable digital transformation, some the Internet of Things, connected cars and intelligence, command, and control initiatives from the Brazilian digital strategy several others. The way people interact and capabilities to make cities safer. Security is (e-Digital) were selected and prioritized in perform their daily activities will be directly considered a major problem in Brazil, but order to move to a tactical level, addressing affected, as well as industries, which will technology can change the way these issues what should be done to help the country to have available higher speed connection are addressed at all levels of the federation. improve its ICT sector and be considered a and greater data traffic. It is the basis for Improved security through technology - reference in at least one of the pillars of the the technological use and improvement that is, smart cameras, artificial intelligence digital ecosystem. of several sectors, from health (remote software, facial recognition - are strategic monitoring of patients) to agribusiness and can increase the well-being of the The e-Digital highlighted 100 actions (monitoring of crops and plantations). New population. Technology is an ally to increase related to the development and business models should emerge and the the safety of the population, especially in improvement of the country in the digital population will be more connected. Brazil. environment. From this starting point, all initiatives from e-Digital were tabulated considering the insights and overview of the ICT sector worldwide and in Brazil Optical Fiber: Talent: described in Sections 2 and 3 of this paper. The development of new technologies Without qualified people, development The initiatives were selected based on and innovation is directly associated with and innovation are restricted. As a basis criteria such as adherence and relevance the infrastructure of telecommunications for the new generations, education plays to the ICT sector and based on their services. New technologies such as one of the most important roles and can impact on e-Digital. After this analysis, a streaming in 4K and 5G will require a better not be disregarded when talking about ICT matrix was built in order to identify those connectivity experience, which may force development. Education is considered the initiatives that present high relevance and the infrastructure to comply with this new basis of the country’s development and high impact. increase in demand. Thus, the optical needs to be aligned with labor market needs fiber plays a vital role in facilitating the reflecting technological innovations. Among all initiatives, 27 were identified as expansion of new business models, bringing the most relevant to the ICT sector as well connectivity to the population. as those that impact mostly other initiatives from e-Digital. After another round of prioritization and analysis, the number of Cloud: initiatives was reduced to 10. It was also selected as one of the main pillars of the development of the national The initiatives were grouped in 5 main ICT sector, since it changes the concept pillars that were identified as the head of supply of some products, directly drivers and the most relevant to the impacting the economy. With the increased development of the country. connectivity made possible by 5G and fiber optics, the massive data generation by the various sensors and devices in IoT, 4K, Games on Demand, among others, will require dynamic allocation of space, increased processing power and cost reduction.
New cloud-enabled business models and user-friendly services generate immediate benefits for the population by reducing bureaucracy for access to services (public and private).
38 Insights about Digital Transformation and ICT Opportunities for Brazil
The initiatives from e-Digital that were Accelerate 4G implementation considered the most relevant and impacting are related to three digital transformation Stimulate state governments to implementate tax axes – data based economy; new business 5G incentives for wireless expansion to rural areas, models; and citizenship and government once the multiplier effects go beyond the sector – and to four enabler axes – infrastructure Connect 22.000 urban and rural schools with and research; development and innovation; broadband digital environment confidence; and education and professional qualification. Reformule FUST to allow its use on broadband Optical Fiber expansion In order to explore the tactical level of these Promote the policy approval of incentives for initiatives, the next section describes each datacenters implementation one of the pillars highlighting the challenges Promote migration of government IT to cloud- and alternatives to overcome them with Cloud based infrastructure suggestions of approaches and cases of success from other countries that have Implement platforms to provide interoperability already passed through or are in the middle and control among public security agencies of the adaptation to the new technological Establish cooperation between public and private and digital ecosystem. Safe City entities to adopt best practices Promote cooperation among government representatives, universities and private sector Promote intersection between private sector and Talent education institutions to supply skilled workforce
39 Insights about Digital Transformation and ICT Opportunities for Brazil
“Brazilian research in 5G is vital to address the country’s needs in terms of geographical and demographic distribution.”
Jose Marcos Camara Brito INATEL
40 Insights about Digital Transformation and ICT Opportunities for Brazil
5. Initiatives in infrastructure, education and public safety create the foundations for the Brazilian ICT development
To better approach the problematic, the Framework structure suggested framework is used to develop proposals and recommendations on Strategic infrastructure, applications, skills and training capabilities. The following figure summarizes the key strategical elements of the ICT pillars to be further addressed throughout the Operational chapter. Additionally, on the operational level, Supply Demand the framework stresses supply and demand aspects to enable ICT development.
The Deloitte framework intends to address how specific actions may impact the ICT sector, unlocking the development of World cases and examples : Cases multiple areas. Considering the strategic and operational levels, an overview of the Source: Deloitte development throughout the project segment is delimited to enable drawing recommendation for improvement. Recommendations for stimulating supply Considering the fact that, in Brazil, each one include initiatives that enable infrastructure of the examined pillars is at a different stage The strategic level is focused on defining deployment, that boost the implementation of development and maturity, the proposed what has to be done to enable the future of new technological solutions and facilitate framework allows the identification of successful development of the specific pillar the execution of innovation projects. specific gaps and the development of a and why it is crucial that the government In order to foster demands for new personalized strategy that focuses on takes actions. On this level, the strategic technological solutions, the government supply, and demand based on some direction of the government initiatives is needs to implement initiatives that ensure examples of successful experience of defined. This includes aspirational goals, the citizens’ security and protection and already implemented projects. definitions, barriers, and critical aspects to be demonstrate the relevance of the adoption considered when policies are implemented. of such solutions. The remaining of this chapter is devoted to the deployment of the Deloitte The operational level answers the The case studies related to the five pillars framework for each of the considered question “How can it be done in Brazil?”, of interest bring examples of successful pillars – 5G, optical fiber, cloud, focusing on the specific initiatives that the models already implemented and fully safe-city and talent. government should undertake in order to functioning. stimulate supply and demand for each pillar. This stage concentrates on the path for creating an ecosystem suitable for Brazil. 41 Insights about Digital Transformation and ICT Opportunities for Brazil
Pillars details
5G 5G ready, everything connected: foundation for connecting mobile and fixed devices under 5G standards.
Insights and recommendations for 5G ready
5G ready
5G ready, everything connected: foundation for connecting mobile and fixed devices under 5G standards Strategic
Synergy between 2G, 3G, New business models and Optimization of the 5G Enablement of new 4G, and 4.5G increased competitiveness spectrum selection standards ecosystems of IT and Telecom
Initiatives that enable supply and demand for 5G: Operational
Supply Demand Reduction of bureaucracy for the installation of new antennas Incentive models for enabling infrastructure (site acquisition and licensing) (backhaul, site acquisition)
Standards for long range signal coverage Broadband “fixed” wireless distribution
Standards for Micro Operators Standards for measuring user experience
World cases and examples : Cases • Incentive models: tax strategy
Source: Deloitte
42 Insights about Digital Transformation and ICT Opportunities for Brazil
The deployment of 5G is considered a 5G is the next generation of mobile Due to the high potential of 5G to extend revolutionary step for mobile connectivity, technology, which offers significantly faster wireless capacity and to create significant providing a foundation for “everything data speed and lower latency rates in opportunities for the development of connected”. In order to ensure that the comparison to its predecessors. The term advanced new technologies, industry, country will follow the rest of the world is used to refer to a number of different academia and governments around in the transition to 5G until 2022, the technologies and, as pointed out by the the world are putting efforts into the government has to consider actions related GSMA9, there is a discussion regarding the development of the 5G technology. In to the definition of a strategic direction of definition of 5G, which is based on two 2017, 5G did not participate in the global 5G implementation, such as promoting major views. The first view is based on the technology mix (2G, 3G, and 4G). The a synergy between 2G, 3G, 4G and 5G, service-led school of thought, which defines deployment process is expected to start optimizing the spectrum standards, and 5G “as a consolidation of 2G, 3G, 4G, wi-fi in 2020 and the GSMA estimates that by enabling the new ecosystem of IT and and other innovations providing far greater 2025 the share of 5G in the technology Telecom. coverage and always-on reliability”, while the mix worldwide will reach 14%. The first second view describes 5G as “a step change commercial launches of 5G are expected A crucial step for overcoming the major in data speed and order of magnitude over the next three years in North America, challenges related to 5G implementation reduction in end-to-end latency”. Asia and Europe. is the investment in initiatives that enable supply and demand, which include the 5G adoption in major countries/regions de-bureaucratization of the process for (forecast for 2025, percentage of connections excluding cellular IoT) installing new antennas, and the creation of a long-range standard requirement and definition of measures for user experience. For the successful process of implementation of 5G in Brazil, the 49% 31% government needs to pursue specific tactical actions, such as changes regarding telecom taxes on mobile usage. 14% US Europe
25% 7%
Global
China LATAM Source: GSMA
43 Insights about Digital Transformation and ICT Opportunities for Brazil
Countries and telecoms around the world In the countries from Latin America 5G Commercial launches of 5G are expected have been performing tests with 5G is expected to reach a share of only 7% to start in Brazil in 2019. The deployment technology with various spectrum bands. by 2025. In Brazil, in particular, there still of the new technology, however, depends 5G-based fixed wireless commercial exists a gap in the deployment of 4G in on the release of the 3.5 GHz spectrum, for launches are expected to start in the United comparison to the rest of the world. The which Anatel is planning to release a bidding States already at the end of 2018, performed country will face significant investment in process in the second semester of 2019. The by the telecom giant Verizon. this type of technology in the next few years initial use of 5G will be for fixed broadband and by 2020, 4G is expected to have a share delivery with speed between 200 Mbps and Even though the of 57%, thus, closing the existing gap with 400 Mbps. the rest of the world. implementation of 5G Telecoms are already preparing for the deployment of the new technology. The around the world is Technology mix in Brazil (in %) national operator TIM performed successful expected to reach 14% of laboratory tests for establishing fixed 5G the global technology mix 9 connections at the end of 2017. by 2025, the distribution 21 Moreover, in 2016, Brazil and the European Union signed an international agreement to across countries and 27 develop the 5G technology standard. The regions will not be equal. 34 2016 signing of the joint declaration happened in Barcelona, during the Mobile World Congress and followed the fundamental agreements signed with China, Japan and 57 52 South Korea. 2G 3G 2020 4G Source: GSMA
44 Insights about Digital Transformation and ICT Opportunities for Brazil
Because of the features of 5G, the evolution Antennas play a significant role in the 5G Most backhauls are built with optical fiber, from 4G to 5G differs significantly from architecture because they are the point and currently the major challenge for Brazil the one from 3G to 4G. A whole new of contact between the network and the is how to overcome the same barriers economic and technological paradigm will devices. Although the 5G technology can faced in broadband distribution (and fiber be created with 5G. make use and orchestrate antennas from deployment). previous standards (2G, 3G, 4G and 4.5G), However, a number of new and existing it is fundamental that new antennas are Frequency and spectrum allocation will conditions need to be in place to reap the deployed in order to support the increase determine the user experience. An optimal full benefits of 5G. Those requirements are in (1) number of connected devices and (2) harmonization of frequency with global hereby called the 5G Ready Components, bandwidth consumption. However, Brazil demands will allow almost seamless user which include all foundational aspects that currently faces a major challenge regarding mobility while on international roaming. will allow 5G deployment in the future. site acquisition and licensing for antennas’ Wide spectrum allocation will allow increase installation. Although there is a Federal Law in bandwidth of data transfer. Both items They include, but are not restricted to: regulating the Service Level Agreement (SLA) are currently being taken care of by Anatel •• Antennas for municipalities to answer a request for (Brazilian Agency of Telecommunications) •• Backhaul antenna installation, that SLA is frequently and discussed in international forums. •• Frequency not met. •• Spectrum allocation New technologies, which go from radio •• New technologies and equipment Backhaul provides the dataflow between to core, are yet to be developed and/ antennas and the network. Current or implemented. Among these, the new infrastructure can also be used, but the generation of radio technologies (e.g. deployment of new antennas in new cognitive radio) coupled with new equipment locations will also require that a backhaul and technologies (e.g. Software Defined infrastructure is set in place to support it. Networks) in the Access and Core networks.
Chalenges that need to be addressed for 5G deployment Transformation Standards From an operator point of As operators begin 5G activities “Killer use cases” view, transform its current ahead of standadization, There is a need to definitely OSS and BSS platforms into identifying use cases and answer to the question of where a convergent MANO solution moving faster than standards is the intersection between across its overall network work, there is an increasing risk economics and long-term operations will be a major of divergence in 5G infrastructure for the 5G 2020 challenge to be solved prior deployments. deployment. to full 5G adoption.
CHALLENGES road to 5G STILL AHEAD 2020
Spectrum IPv6 & Massive IoT Security Decisions are yet to be made The needed IPv6 adoption With the IT-driven 5G on spectrum availability for 5G. to support the massive IoT architecture, and its non-telco New bands below 6GHz and will have to be guaranteed by protocols more susceptible above 24GHz are still yet to operators in their networks, to hack, the critical services be defined, and judgments on if one wants to take advantage on top of the network will spectrum refarming are yet to of the full spectrum of 5G demand extra attention be made. possibilities. to security.
Source: Deloitte
45 Insights about Digital Transformation and ICT Opportunities for Brazil
With the increasing quality Key characteristics of 5G enable of different use cases. For instance, of connectivity, more and largescale IoT adoption and success mission-critical latency can be provided to a degree that is impossible with the for applications relating to self-driving more value-generating IoT current state of connectivity technology. cars, while de-prioritized traffic could use cases can be deployed Two of those key characteristics are be offered for more price-sensitive uses lower latency and higher throughput. cases like tracking bulk containers during for the benefit of people The combination of these aspects road or rail transport. All these aspects and organizations. enables real-life implementations of use combined mean that organizations will cases that are currently only possible in have access to connectivity technology small-scale lab environments, such as that enables scaling up their current The Internet of Things (IoT) is nothing self-driving cars, remote surgery, remote proof-of-concept setups. but a network that connects physical construction robots, and real-time AR/ objects, such as vehicles, machine VR applications. However, lower latency This scenario comes right in hand tools, street lights, wearables, wind and higher throughput alone are not with the Brazilian aspirational vision turbines, other devices and people, via enough for the large-scale adoption of on IoT, written by MCTIC, MPDG connectivity solutions in order to enable such use cases. Two other key aspects (Ministry of Planning, Development and communication, exchange data, and enable mass adoption of these types Management) and BNDES in 2007: derive actions. of innovations: support for more “Accelerate the implementation of IoT as simultaneously connected devices and a the instrument of sustainable development IoT already makes this possible by more efficient use of energy. for the Brazilian society, capable of connecting more devices, even in increasing the competitiveness of economy, areas that are difficult to reach, at Finally, 5G makes ‘network slicing’ strengthen the national productive chain lower battery consumption than other possible, a technology that enables and promoting the improvement of quality connectivity technologies. However, with network operators to create multiple of life”. the deployment of 5G technologies in the (virtual) networks within one network. near to the medium future, a truly big This means that different priorities, shift in IoT will take place. availability, latencies, and throughput can be set to meet the requirements
46 Insights about Digital Transformation and ICT Opportunities for Brazil
Recommendations This law, however, is not followed by most of This diversity and legal uncertainty reflects Currently the main barrier for 5G the cities in Brazil, and eventually operators on the time that takes for an antenna to be deployment in Brazil is the installation of have to negotiate independently with the installed in different cities across Brazil. the required infrastructure (antennas and administration of each municipality, which backhaul). There are mainly two types of causes delays and legal uncertainty. A study from Teleco shows that from the 100 barriers: impediments for site acquisition/ biggest Brazilian cities, 99 took more than licensing and economic motivation. A study conducted by SindiTeleBrasil in 2017 2 months to provide a license for antenna Government actions that address the mapped that in Brazil, there are around 300 installation (this is the maximum time overcoming of these barriers are crucial municipal and state laws that restricts the stipulated by the Law of Antennas). for the successful future adoption of 5G in installation of telecom infrastructure inside Brazil. cities. Most of those restrictions are related to limitations on radiation exposure, which (i) R eduction of bureaucracy for the divert from what is regulated in the Federal installation of new antennas (site Law 11.934/09, based on WHO standards. acquisition and licensing) Site acquisition in Brazil is regulated by the so-called Law of Antennas (Lei Geral das Antenas Nº. 13.116 / 2015), which is a Federal Number of cities according to the ERB’s authorization time (in %) Law that determines the requirements and service-level agreement (SLA) for any public 44 administration to answer to a requirement 42 for antenna installation.
That SLA was set to 60 days and it states that all municipalities’ administrations have to go through the entire local-specific bureaucracy within that time frame, no matter how many internal departments have to be accessed or how complex local processes are.
9
4 1
More than 6 to 12 3 to 6 2 to 3 Less than 1 year months months months 2 months Source: Teleco
47 Insights about Digital Transformation and ICT Opportunities for Brazil
Comparison between legal requirements and typical timescales for permission granting for base station deployment (in months) 25
Legal commitment Typical timescale 2007 Typical timescale 2009 20 Typical timescale 2012
15
10
5
0 Italy Spain Malta Latvia Turkey France Cyprus Poland Ireland Austria Croatia Greece Finland Norway Sweden Slovakia Belgium Bulgaria Slovenia Portugal Hungary Romania Germany Denmark Lithuania Montenegro Czech Republic Czech The Netherlands Source: GSMA – Base Station Planning Permission in Europe, 2012.
While in Brazil there is such an uncertainty One possible way of achieving this goal In order to extend the coverage, it is regarding site acquisition, other countries is creating a decree. Since the Antenna necessary to establish a standard in the are managing to be more agile in this Law determines the 60 days SLA for regulation of antennas. According to respect. For example, in the UK it takes 2 municipalities administration to respond SindiTelebrasil, there are municipal laws that months to obtain a license, while in the US to a license request, whenever that SLA is restrict the installation of antennas, such as and Portugal, it takes only 1 month. not met, the request can automatically be those that establish minimum distances for considered approved. Such a mechanism the installation of ERBs, others that prohibit Therefore, in order to make 5G infrastructure can drastically reduce the current figures of the installation of ERBs near hospitals, clinics more broadly available, it is required that the antenna deployments lead-time. and schools, laws that restrict installation in government in Brazil invests in legal actions certain zoning, neighborhoods or artistic and to enforce the Federal Law of Antennas, cultural patrimony areas, as well as in squares, which was approved on April 20th, 2015. avenues, streets and other public spaces.
48 Insights about Digital Transformation and ICT Opportunities for Brazil
The process of requesting the installation These sparse areas present economic communications technologies have not of antennas in a municipality is costly challenges in terms of mobile signal been able to eliminate this access deficit and consists of many steps, including distribution, since it may become cost in the country. The 5G networks are a requirements of several documents and inefficient to install antennas (and great opportunity to create a technology studies, manifestations of various organs correspondent backhauls) to cover all that that is capable of taking Internet access and secretariats and with the collection population. to remote and rural areas, with great of licensing and renewal fees, as well as potential to reduce the country’s digital collection by the use of the public space. One way of reducing that cost is adopting exclusion scenario. However, In order to do standards that allow more coverage and it, technical, regulatory and governmental There are alternatives for the installation bigger distance of the 5G signal, which, in policy challenges must be overcome. of antennas, according to the technical turn, can decrease the number of antennas report prepared by CPqD for SindiTelebrasil required to cover a specific area. Thus, it is It is important to observe that, historically, and Abrintel in December 2015. The important that Brazil works together with Brazil has always used technologies CPqD describes models of installations international committees to establish long- conceived by major technological powers of radiocommunication transmitting range standards for 5G deployment. and has adapted them to meet national stations with comparable infrastructure needs. This resulted in a partial coverage characteristics for the purpose of dispensing There is still a huge connectivity gap in the of several important applications for the of licenses. In this paper, international world, and particularly in Brazil. ITU studies Brazilian society society and, in some cases, experiences were analyzed and it was indicate that more than 3 billion people do services of great necessity were not met observed that some self-regulation not have Internet access in the world. In because the technology adopted was not proposals reduce the asymmetry of the case of Brazil, 44% of the population designed for this purpose. Internet access in information between public and private does not have access to it. For technical remote areas and rural areas can be seen as agents. or economical reasons, currently available the prime example of this reality.
(ii) Long-range standard requirement Requirements 5G x LTE 5G is a standard that will surpass 4G in Radius every feature. Currently, standard definitions (km) are being set in the 5G Infrastructure Public 50 Private Partnership (5G-PPP), which is a joint Peal data rate User experienced (Gbps) initiative between the European Commission 10 data rate (Mbps) and European ICT industry. 20 100
10 Brazil is an important player in the existing 1 global discussions for 5G standards because of the relevance of its mobile user base and internal market. This relevance can be used Area traffic 10 Spectrum capacity 3x efficiency to defend standards that are more adequate (Mbps/m2) 1 1x 0,1 for Brazil’s conditions and its consumers. One example is the long-range standard, which is related to 5G signal coverage and distance. 1x 350 400 10x The country has supported the Long 500 Mobility Network 100x Range standard, due to its extensive (km/h) energy efficiency territorial dimension, with very populated 102 10 urban centers along the coast and sparse agglomerations in the most central areas of 1 the country. Such a standard would also be 102 extremely beneficial for rural areas, allowing Latency Connection density (m/s) them to have access to a higher quality of (devices/km2) connection. Source: INATEL, 2018
49 Insights about Digital Transformation and ICT Opportunities for Brazil
5G Architecture Proposal Moreover, “all-in-one” solutions that support a range of frequency bands (sub-3 Enhanced Broadband GHz and 4T4R high-band) already exist on 10 Gbps with high cells density mmWave. the market. The deployment of this type 5G for Remote Areas Fragmented spectrum. of technology allows for the effective use Large coverage. of space for the installation of antennas, Sparse network nodes. Scarce backhaul links. once those solutions decrease the need of various antennas for covering multiple Ultra-Reliable sets of frequencies. This technology also Latency < 1ms. produces benefits related to visual pollution Robustness. – an aesthetic issue related to multiple Sub-1GHz operation 5G Large coverage. antennas spread throughout the cities, and High transmission power. can resolve possible conflicts raised during High propagation delay. the antenna installation process. Thus, in Interference management. Massive MTC the case of 5G deployment, operators could Integration with satellite Loose synchronization backhaul. Multitude of devices opt for installing new antennas based on Low energy this technology.
Additionally, it is important to highlight the marginal cost effect on installation of new For 5G networks, which are currently (iii) Smart cells technology antennas and small cells. in the stage of technological definitions Another way of increasing 5G coverage is by and standardization, there is a unique allowing operators, small and medium size This effect occurs when an antenna is opportunity. For the first time Brazil is Internet service providers (ISPs) to deploy planned to be installed in the vicinity of in a position to participate actively in antennas and provide telecom services an existing one. Because all the backhaul the development and standardization in remote areas. This can be achieved by infrastructure was already built to the process of this new technology, enabling defining operating models for ISPs and first one, the cost-analysis for the second the development of national technological operators to provide mobile services needs only to consider the marginal cost solutions in line with what is being through “small cells”, which basically consist of extending the backhaul and overhead developed in the main technological powers of a cost-reduced infrastructure of antennas operational management to the second of the planet. designed to cover a small region. antenna.
These sparse areas present economic That small region can be a remote area This kind of analysis plays a major relevance challenges in terms of mobile signal (rural area), or even urban locations where when operators or ISPs decide if a certain distribution, since it may become cost mobile signal is weak (for example, inside region may provide the economic ROI inefficient to install antennas (and buildings). (return on investment) from a wireless correspondent backhauls) to cover all that infrastructure deployment. population. The smart cells technology can also be associated with smaller sites, which can In order to stimulate domestic demand for One way of reducing that cost is adopting therefore be more easily regulated. These 5G deployment in Brazil, the government standards that allow more coverage and sites are known as “cell sites” and are needs to promote actions related to the bigger distance of the 5G signal, which, in characterized by less coverage and less development of incentive models for turn, can decrease the number of antennas footprint. enabling the infrastructure (tax incentives), required to cover a specific area. Thus, it is as well as the creation of standards for important that Brazil works together with measuring user experience. international committees to establish long- range standards for 5G deployment.
50 Insights about Digital Transformation and ICT Opportunities for Brazil
(iv) Develop incentive models for Taxes levied on consumers in Brazil, 2015 enabling the infrastructure (tax Payment base Type Tax rate (in%) incentives for municipalities - site acquisition) Calls and SMS ICMS* 25 – 35 In order to make the Law of Antennas more Mobile broadband ICMS* 25 – 35 regional exemptions attractive to municipal administrations, and enhance economic conditions for operators Handsets and SIM card ICMS 17 – 20 to deploy antennas in non-connected areas, * Mobil specific the Brazilian government could pursue Source: GSMA & Deloitte Brazilian Telecom tax analysis, 2016. three actions regarding telecom taxes on mobile usage: 2) Rebalance the tax income distribution 3) Reduce tax rate on mobile telecom, across public entities: with consequential increase in overall tax 1) Promote to municipalities’ administrations revenue due to usage increase. that 5G is an enabler for other new business While the municipal administration in Brazil services that can run on top of it. For currently has the power to issue licenses A study conducted by Teleco11 shows that example: connected cars, smart public for antenna installation, it receives only a Brazil has some of the highest tax rates illumination, real-time health monitoring etc. share of the collected ICMS tax from calls, in telecom when compared to other Those new business models can provide SMS, mobile broadband, handsets and SIM countries. increased tax revenue to the city, but for cards. Therefore, one way of increasing the that to happen, the cities’ administrations incentives for expanding the mobile service need to accelerate the time for licensing new and allowing more antennas to be deployed, sites for antenna installation. is rebalancing the distribution of the ICMS10 tax collection across public entities in the country.
Taxes/net revenues (%)
43
26 25
21 20 20 20 19 19 18 18 16 13 12 10
5 3 Italy USA Peru Chile Brazil Spain Japan China Russia France Mexico Portugal Australia Colombia Argentina South Korea
Source: Teleco, 2015 United Kingdom
51 Insights about Digital Transformation and ICT Opportunities for Brazil
The reduction in the level of taxation on Moreover, the telecom industry is an enabler the mobile sector may have a negative for the development of other sophisticated impact on government revenues in the business models. By creating incentives short term. By increasing mobile to improve the telecom foundation, the penetration and promoting economic government can leverage tax revenues growth, however, the reduction in tax from products and services that will emerge burden on mobile will also increase the tax based on this technology. Successful cases base, enabling the government to recover of countries that have adopted this strategy the lost revenues. of reducing taxes on the mobile sector include Uruguay and Kenya.
CONSUMPTION OF REVENUE FROM EMPLO MENT OF 1 2 MOBILE SERVICES MOBILE SERVICES OPERATORS TAX AND FEE PRICE OF MOBILE 3 PROFITABILIT OF INVESTMENT TAXES AND FEE PROPOSAL SERVICES MOBILE SERVICES PA MENTS
PASS-THROUGH PRICE ELASTICIT OF DEMAND Changes in price and consumption load to a new A percentage of the tax and fee Across different groups of consumers level of revenue generated from mobile services. payments is reflected in retail determines the impact of change in Tax and fee payments and labour demand will also price of mobile services. price on consumption. adjust accordingly. Changes in profitability will influence the level of investment.
Economy-wide impacts
4 MULTIPLIERS 5 ESTIMATES CORE IMPACTS SPILL-OVER IMPACTS
REAL GDP TAX REVENUE PRODUCTIVIT GROWTH
MOBILE EMPLO MENT INEQUALIT INVESTMENT PENETRATION
Dire t impa ts are extrapolated onto the economy Other metrics use concepts well-developed in research, using multiplier factors, adjusted for the size of the including previous GSMA/Deloitte work on the impact of country and market structure. penetration on economy growth, to qualify spill-over effects.
The level of taxation and The price of mobile Changes in the level of These changes to the An elasticity determines 1regulatory fees applied 2services determines the 3consumption of mobile 4mobile sector lead to 5the impact of a change to the mobile sector are demand and therefore the services lead to a new direct impacts on value- in mobile penetration on reflected in the retail aggregate consumption level of revenue generated add and employment and, GDP growth. Multipliers prices operators charge of mobile services. by operators, which through spillover effects are assumed which allow for using their services. The price elasticity changes the level of on the wider economy, in changes in mobile sector Therefore, a change in of demand describes taxes and fee payments particular on real GDP, tax employment to affect the taxation or regulatory fees the responsiveness of and labour demand revenues, employment wider Brazilian labour will lead to a change in demand to a change in the accordingly. and investment. force. Productivity is the retail price of mobile price, and is defined as calculated using the total services. A passthrough the percentage change in factor productivity impact, rate represents the demand resulting from a described in the appendix. percentage of the tax and given percentage change fee payments which is in price. reflected in the retail price of mobile services.
Source: GSMA & Deloitte Brazilian Telecom tax analysis, 2016.
52 Insights about Digital Transformation and ICT Opportunities for Brazil
Tax Impact Chain Operator Prices to Demand for Operator taxation consumers mobile services revenue
Workforce Government GDP Unemployment demand tax revenue reduction
Operator Prices to Demand for Operator taxation consumers mobile services revenue
Workforce Government GDP Unemployment demand tax revenue Source: Deloitte
(v) Promote Broadband “fixed” wireless (vi) D efine a standard on measuring increase in penetration rates between 2016 distribution user experience and 2017 has been for smartphones and Modern technologies can deliver wireless Another challenge for the Brazilian that smartphones are the most frequently broadband to fixed locations. These government is the definition of standards used devices among the population. technologies are marketed by some for measuring user experience, since the manufacturers as WTTH – Wireless to the telecommunications sector has moved Currently, the main drivers for measuring Home, or WTTx – Wireless to the X, X being from network-centric to user-centric in mobile service quality are related to network anywhere (Home or Office). the recent years. technical measurements and consumer complaints registered in official and non- This type of broadband access can be an The use of smartphones has increased official bureaus (eg Reclame Aqui, Proteste, alternative to locations where fixed landlines significantly in Brazil during the last decade, Procon). are difficult to distribute and high bandwidth and their use is becoming prevailing in the through satellite connections are cost life of Brazilians. Such an increase in use Although those key performance indicators prohibitive. requires better and more sophisticated (KPIs) can provide a fair overview of the methods of evaluating service quality. network conditions, they lack in providing Rural schools, remote learning centers, a deterministic measure of how customers remote public administration offices can A recent survey conducted by Deloitte in are experiencing the network service. largely benefit from such technology. 201712 concluded that in Brazil the greatest
Frequency of usage by device (en %)
Never Longer than three months Last three months 89 Last month 75 72 Last week Last day 58 47 45 41 35 33 27 23
player phone eReader headset computer Small tablet:Small Smart watch Large tablet: Large Smartphone Fitness band over 9 inches 9 over Virtual reality Desktop/tower Portable games Standard mobile Standard Laptop computer Laptop
Source: Deloitte inches between 7-9
53 Insights about Digital Transformation and ICT Opportunities for Brazil
In the GMSC 2017, it became evident supplier or renewing the contract. Therefore, it is important to implement that quality of the network and the cost On the other hand, the availability of mechanisms that can measure in the end are the major factors for consumers when additional services is not a major factor for point (cell phone) how the quality of the considering switching mobile network most users. provided service is evaluated by the final consumer. Device penetration 2017 and year-on-year growth (in %)
Smartphone 87
Laptop 67
Desktop/tower computer 58
Tablet 44
Standard mobile phone 21
Portable games player 12
Smart watch 8
VR headset 8
E-reader 7
Fitness band 7
Source: Deloitte
Top 7 reasons in each category (in %)
Very important Fairly important Not important
Quality and coverage of network when Availability of connected Availability of music streaming 73 41 31 accessing the Internet or data services home devices services
Quality of customer services/ Availability of specific video Availability of specific video 69 40 25 technical support streaming services streaming services
Availability of tariff with Availability of early phone upgrade/ No hidden/surprise costs 69 40 25 shared data plan shorter contract length options
Availability and quality of Availability of early phone Availability of connected 66 38 23 Wi-Fi hotspots upgrade/ shorter contract home devices
Availability of music Availability of additional services Total monthly cost 65 streaming services 37 21
Availability/price of Availability of additional Availability of voice over Wi-Fi 65 37 20 unlimited data tariff services (VoWiFi) or Voice over 4G (VoLTE)
Quality and coverage of network Availability and price of Roaming tariff costs 64 36 19 for voice calls a friends and family package (i.e. when abroad)
Source: GMSC, 2017
54 Insights about Digital Transformation and ICT Opportunities for Brazil
Case study
Lower taxation boosts mobile sector growth in Uruguay
In 2007, the Uruguayan government Tax as a percentage of total cost of mobile usage, 2011 (in %) abolished an excise tax (ITEL) on airtime that affected telecom usage, directly 40 impacting mobile consumers. This fixed tax, consisting of UYU 0.4 per minute for 35 local calls and UYU 2 per minute for long distant calls, accounted for 30%-50% of 30 the cost of calls. 25 This fixed tax affects usage and also contributed to increasing barriers to 20 mobile ownership, especially for low income consumers. Consequently, the 15 removal of this tax has led to a number of positive effects: 10 •• Call prices have fallen by 67%. •• Mobile penetration more than doubled, 5 from 65% to 141%, after the taxes abolition. 0 •• Usage increased by more than three Peru Chile
times. Brazil Mexico Panama Ecuador Uruguay Paraguay Colombia Argentina Nicaragua Venezuela As a result of the growth in the market Guatemala
the tax contribution of mobile operators average Global has also increased four-fold, providing a significant windfall to the government. Dominican Republic This illustrates that revenues lost through Uruguay’s mobile and smartphone penetration reductions in distortive, mobile-specific taxes can be recovered through more Before tax abolition broad-based taxation on the sector as it grows. After tax abolition
Through the reduction of mobile specific 0 30 60 90 120 taxation, the government of Uruguay increased the usage of mobile services Source: GSMA Latin American Mobile Observatory 2011 by removing barriers to affordability. By developing supportive taxation and regulatory policies, the government enabled the growth of the mobile sector, and the associated benefits from increased employment and investment.
55 Insights about Digital Transformation and ICT Opportunities for Brazil
Optical fiber Optical fiber: the bridge to the future. Infrastructure as a first step towards achieving digital transformation.
Insights and recommendations for optical fiber
Optical fiber
Optical fiber: the bridge to the future – infrastructure to transform the country into a digitally empowered society Strategic
Improvement on the quality of Network expansion and Universal Services Funding resources services, while generating an improvements Obligations environment for innovation
Initiatives that enable supply and demand for optical fiber: Operational
Supply - Infrastructure Demand Encourage PPPs to attract investments in infrastructure National Broadband Programs to make broadband available, constructions affordable, and accessible Promote synergies between utility and telecommunication Integrate the population to new technologies and applications infrastructure to incentivize infrastructure sharing Mandate optical fiber project integration to facilitate Incentivize e-government applications and broadband deployment favor digital innovation
Suggestions for concrete actions: Cases • ROI on optical fiber installation • Universal Services Funds • Infrastructure synergies
Source: Deloitte
56 Insights about Digital Transformation and ICT Opportunities for Brazil
The digital ecosystem has incentivized known as Ultra HD, is one of these recent into the digital era. These points are: innovation, resulting in new products and advancements and represents one of •• The dig once policy, which mandates services available to society. To respond the leading commercial applications on construction project planning to facilitate to the agility required by daily activities, the market, while 8K technology is still in optical fiber deployment; broadband connection has become a testing phase with no expressive market •• Right of way14, to address the right to pass necessity for the entire population, being representation. The consumption of 4K along a specific route; part of the digital agenda of every country. content, however, requires high connection •• Infrastructure synergies between utility speed (minimum of 25 Mbps) which distribution and optical fiber network; Service providers and telecommunications currently represents only 5% of Brazilian •• The Universal Services Fund intends to carriers must deliver applications with households market, according to the assure that the entire population has tangible value to the population. Networks Internet Management Committee in Brazil access to the country’s universal services. need to be upgraded and expanded in (CGI.br). order to meet the increasing data traffic – 2.1. Broadband in Brazil and streaming content (4K and 8K resolution), Considering the Brazilian performance in the world e-commerce, and social media – which can indicators related to coverage expansion, Countries are investing to lead the global be efficiently handled by optical fiber. connecting remote areas to the Internet, as digital transformation, with broadband well as the initiatives and actions presented and optical fiber as the base for innovation. New emerging technologies have improved at e-Digital13, there are some critical In 2016, the broadband penetration in the image quality, which requires an challenges that need to be overcome in Brazil (12.9%) was still below the global improvement in data transmission and order to expand broadband connection. average (13.9%), figuring at the 83rd connectivity of Internet services for the Some strategical points, highlighted below, position in the access to fixed-broadband population. The 4K technology, also might be developed in order to move Brazil subscription rate.
Fixed-broadband subscriptions per 100 inhabitants. 42.7 40.5 39.1 38.3 36.9 33 31.2 30.6 30.4 28.8 26.8 26.2 23 19.1 16.5 16.2 Global: 13.9 12.9 12.6 12.2 9.8 8.3 6.67 Italy Peru Chile Brazil Spain Japan China France Ireland Mexico Canada Ecuador Uruguay Australia Germany Colombia Argentina Venezuela Korea (Rep.) United States United Kingdom
Source: ITU World Telecommunication/ICT Indicators Database (2016) Russian Federation
57 Insights about Digital Transformation and ICT Opportunities for Brazil
The Global Connectivity Index 201815 between 2015 and 2017, according to the mainly due to the low rates at the presents the indices for the years of 2015 GCI 2017), a factor that could lead to a new beginning of the century. Brazil has the and 2018 on a S-curve divided in three form of segregation, the digital one.16. potential to surpass the global average on different clusters - starters, adopters, and fixed ‑broadband subscription. frontrunners - and shows that the digital In Brazil, since the early 2000s, the figures divide between the clusters increased related to the expansion of broadband According to the Brazilian Internet Steering during the period (behavior observed coverage across the country are remarkable, Committee (Comitê Gestor da Internet no Brasil, CGI.br), there are some constraints to the expansion of Internet penetration countrywide. Among the reasons for not Fixed-broadband subscriptions per 100 inhabitants using the Internet in Brazil, are the lack 45 of computer use and skills, high costs to connect or to have equipment to access the 40 Internet and the unavailability of broadband infrastructure (ICT Households 2016). 35
30 A significant part of the Brazilian population remains unconnected. 25 When we compare the number of Internet providers per municipality to the GPD 20 per capita, it is possible to observe the 15 providers’ concentration at important economic areas, with higher GDP per 10 capita, which could be an indication of scale economics. 5 In Brazil, cities with more than a hundred 0 thousand inhabitants have complete 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 broadband infrastructure coverage, Brazil China United States Russian Federation France Global representing only 5% of the total, or 300 Source: ITU World Telecommunication/ICT Indicators Database (2016) cities out of 5.570. The phenomenon is a consequence of scale economics, business plan models, and high costs to deploy broadband infrastructure in remote areas. GDP per capita and number of providers per municipality
Source: IBGE 2016 and Teleco, respectively.
58 Insights about Digital Transformation and ICT Opportunities for Brazil
In Brazil only 5% of the According to the U.S National Broadband Plan17, the largest cost for broadband cities, 300 out of 5.570, deployment is not the fiber itself, but the process of burying optic fiber cables and have complete broadband conduit underground or attaching it to poles in an aerial build. infrastructure coverage 1. City of Boston, dig once policy18: 2. City of San Francisco, dig once To minimize excavations along the policy19: roadways, the city of Boston adopted a The dig once legislation approved in As shown for the Internet connection in dig once policy in 1994 that required all 2014 requires the city of San Francisco mobile devices example, Brazil has almost a telecommunication companies to install to install conduits during projects third of the total number of mobile internet the conduits in a shared infrastructure involving public right-of-way, reducing users in Latin America, corresponding to on a shared-cost basis. Under this policy, the need for future excavations. It 85 million of a total of 231 million. any company that approaches the city applies to street or sidewalk excavations for a request, takes on the coordinating longer than 900 feet (approximately The projection for the fixed or mobile efforts for planning and implementing 300 meters). As the conduit network Internet users in Brazil, when compared to the installation process in consonance across the city grows, the city is able Latin American, is expected to reduce by with the other telecommunication to generate revenue by leasing the 2020. companies. All companies work together infrastructure. At the same time to draw the engineering plans, estimate companies lower their costs to install Regarding mobile devices, it is observed construction costs and submit the optical fiber network. Once the trench is that 72% of the population has an Android application for review and approval. repaved, there is a five-year moratorium smartphone and WhatsApp is the most Besides minimizing excavations and on excavating the roadway (Connectivity popular mobile application (47 million users) expediting the broadband deployment Plan, City & Council of San Francisco in the country. The average number of process, this approach allows the 2017). Through a notification process, applications installed by Brazilians is 63 per inclusion of additional shadow conduits the city ensures that other interested device, and social applications represent for future use by either the city of parties have the opportunity to install 20% of the frequency of use. Boston or a later entrant. conduits and cabling in the open trench.
On the other hand, mobile data traffic is estimated to grow twice as fast as the IP 2.2 Recommendations needed, increasing the Internet access to traffic between 2016 and 2021, and 77% communities across the country. of the local mobile access will be made on (i)Dig once smartphones by 2021. For the development of a consistent Among the different aspects to incentivize broadband network, it is necessary to In order to improve the infrastructure optical fiber installation across the country, deploy a complex infrastructure to support and connect the entire population, the the concept of dig once stands out and its advances. Frequently, the process of Brazilian government has already included should be approached at every level of optical fiber installation requires excavations discussions over the optical fiber expansion the government, crossing the borders of in already developed areas, increasing on its agenda, to transform the country into the federal, regional and local level. This costs, disruptions, disturbances and risks. a digitally empowered society, providing concept translates itself into policies and To minimize digging up public ways, the Internet connection to citizens. regulations to minimize the amount of different government spheres ought to excavations required to install conduit encourage a dig once policy implementation, In this context, the National Plan infrastructure and to facilitate the access to throughout conduit installation during for Connectivity (Plano Nacional de rights-of-ways. compatible construction projects. Concectividade, PNC), in reference to the National Broadband Plan, aims to expand These policies encourage the deployment The government has to incentivize the access to broadband and mobile Internet of conduit and fiber that would house installation of conduits whenever and through the allocation of public resources. Internet cables in public rights-of-ways wherever there is an underground Following guidelines for public rules, the during infrastructure improvement projects. improvement construction in the public government intends to enhance the capacity Instead of digging up the roadway multiple way, whether the construction is for general expansion to increase the coverage of the times, the dig once policies facilitate the repairs, new utility equipment installation country at least with 3G technology. access to infrastructure and cables as or roadwork. With this infrastructure
59 Insights about Digital Transformation and ICT Opportunities for Brazil
in place, the government will then have to customers. The costs associated for the installation costs, which may include the opportunity to lease it to broadband to deploying broadband services are additional materials, extra labor fees, providers and telecommunication carriers remarkably high and represent the main and any design variation in the project to interested in deploying fiber networks. The entry barriers in this market, resulting in facilitate the conduit deployment. private sector may join this approach and a lack of competition. The dig once policy incorporate the pre-deployment of optical in particular addresses cost reduction, A well-defined policy also minimizes legal fiber in new construction projects, such stimulating the competition and facilitating controversies. The government already as residential or commercial buildings, to the entrance of new players to the market. possesses authority and permission to facilitate the integration to the consumer. construct in the public right-of-way, which c. Increasing the reliability of broadband decreases the bureaucracy involved. As networks, for it incentivizes installing optical the dig once policy is in place, conduit Governments have to fiber underground. Broadband providers installations occur with each new and telecommunication carriers have incentivize the installation infrastructure improvement project and access to an underground conduit network progressively increase the coverage of the of conduits whenever infrastructure, allowing an easier and more network, making the area ready for the cost-efficient optical fiber installation. and wherever there is an deployment of broadband services, as well as eliminating the necessity for any underground improvement On the other hand there are some issues additional excavations. construction in the public related to the dig once policy that should be taken into account. Considering the example right-of-way. of the United States, according to the U.S. Government Accountability Office (2012), a federal dig once policy could: Evaluating the return on The initiative of incorporating FTTH (fiber- investment of optical fiber to-the-home) installations into construction •• Lead to an unused conduit infrastructure, installation costs projects through the dig once policy facilitates mainly for a short-term period, while The recovery of the investments not only broadband access to the end user, companies have yet to decide to explore starts when companies lease the but also introduces the concept of smart new markets or expand their existing conduit infrastructure assets. Costs buildings. Communication facilities, such operations; for the installation of optical fiber as basic infrastructure of smart buildings, •• Increased costs of public infrastructure cable conduit, independently of the should be designed by construction projects, requiring extra funding sources; excavation cost itself, vary between companies according to the requirements but, as leasing fees may be applied, US$10.00 and US$20.00 per meter of telecom operators in order to ensure 20 the government should face it as an installed . In contrast, the lease rates the quality of Internet services. Moreover, investment; paid by the private sector vary from FTTH standardization accelerates the US$2.50 per meter up to US$3.00 per popularization of the broadband network. •• Conflict with regional and local broadband linear meter of conduit per year21. deployment policies, demanding Conduit As a result, the dig once policy encompasses additional administrative costs to maintain US$20.00 per meter installation cost a conjunction of benefits, such as: the program. US$2.50 per meter Conduit lease rates a. Minimizing repeated excavations, allowing per year It is essential that the government companies to access a shared conduit orchestrates the use of the conduit Once the government manages to network: each additional excavation infrastructure built from the dig once policy, secure multiple leases for different exposes the surroundings to risks of guaranteeing the most efficient usage of this telecommunication companies at the causing underground equipment damages infrastructure. same time, the additional revenue and service outages, traffic disruptions, as could be used to cover internal costs well as road deterioration and shortening In the United States, the dig once policy for managing the public right-of- of their lifespans. Additionally, the process demands that the government installs way. In case the conduit network is wastes government resources, due to the conduits. For public projects, the leased to four different providers, the processual, safety and environmental government assures the installation of payback timeframe may be reduced concerns, in each excavation turn. a conduit infrastructure in consonance to 2 years, if we consider a yearly lease b. Reducing entry barriers, which increases with the project. In contrast, for private rate of US$2.50 per meter. competition and improves service options excavation projects, the government pays
60 Insights about Digital Transformation and ICT Opportunities for Brazil
The dig once policy stands out as a Net revenue market share (in %) The universal services evolve over time recommendation to broadband expansion. 3.5 1.4 due to the dynamism of the ICT sector, Note that governments interested in 2 31.5 developing the broadband infrastructure mainly because of the innovations 6.7 should enact the dig once regulation on technology and services. As a promptly, due to the enhanced benefits for result, worldwide regulators set the conduit network. criteria to reevaluate which services are universal, considering availability, 11.8 22 (ii) Universal Service Funds affordability and accessibility . The Universal Service Funds (USF) I For the European Union23, the have been endorsed as a financing process for reviewing the scope mechanism for expanding the coverage of Universal Services considers of telecommunication services. Combined whether the USOs have been with regulations and public policies, these changed or redefined following: 17.3 25.9 Universal Funds reaffirm the concept of - “Are the specific services available Vivo universalization of services, considering to and used by a majority of Claro that no one should be excluded from Oi consumers and does the lack technological advances. Tim of availability or non-use by a Sky minority of consumers result in Nextel In Brazil, the Telecommunication social exclusion?”; Algar Services Universalization Fund (Fundo Others - “Does the availability and use de Universalização de Serviços de of the specific services convey Source: Teleco Telecomunicações, FUST) is composed a general net benefit to all by a percentage contribution from the consumers such that public telecom service providers’ operational gross In the particular case of the Brazilian intervention is warranted in revenues and was created with the purpose regulator, ANATEL is also responsible for circumstances where the specific of universalizing services provided under establishing which services are considered services are not provided to the the format of public regime. This applies universal. According to the General Plan public under normal commercial only to the fixed telephony. However, as for Universalization Goals (Plano Geral de circumstances?” people migrate from voice to data, the fund Metas de Universalização, PGMU), ANATEL II For the USA24, Universal Services might become without purpose. can propose a review of goals related to shall be revisited periodically, the universal service obligations (PGMU, taking into consideration advances Among the Brazilian telecom regulatory 1998, art. 2, par. 2). In the same decree, the in technologies and services. A agency’s attributions (ANATEL) we may point PGMU defines universalization as the right Universal Service that may be out assuring the quality and universality of access, by all people and institutions, supported by Federal Universal goals, as well as promoting competitiveness regardless of location and socioeconomic Service support mechanism shall in the sector. However, an analysis of condition, to fixed switched telephony consider if the development of the the Brazilian telecommunication market service provided by a public regime (PGMU, telecommunications services: reveals how it is concentrated in the major 1998, art. 1). Therefore, the PGMU specifies - “are essential to education, public conglomerates that provide fixed switched that the scope of the Universal Services health, or public safety; telephony, mobile telephony, broadband Obligations (USOs) is limited to fixed - have, through the operation of and paid-TV services. The three biggest telephony. market choices by customers, been ones control 75% of the market. subscribed to by a substantial majority of residential customers; - are being deployed in public telecommunications networks by telecommunications carriers; and - are consistent with the public interest, convenience, and necessity”.
61 Insights about Digital Transformation and ICT Opportunities for Brazil
All the innovation that the ICT Market faces In terms of Universal Service Funds partnership it is necessary to adapt funding emphasizes the importance of reviewing (USFs), their designation to fulfill universal mechanisms in existing USFs, possibly periodically the regulatory definitions and service obligations conflicts between facing political pressure and opposition. public policies for the Universal Service covering disparities over existing networks Therefore, the government ought to review Obligations (USO). After revisiting its USO and deploying new infrastructures for the characteristics of USFs in order to meet definitions, Brazil has included in the PGMU, underserved areas. Deploying USO may universal services obligations. Technological 200825, the installation of backhauls in also require great consonance between neutrality, political independence and every city of the country, addressing the the public and private sectors to enhance investments efficiency must be assured in availability of broadband infrastructure, expertise and investments capabilities. these reforms in order to prevent negative with the purpose of growing broadband However, to consolidate this public-private impacts to society. penetration rates.
By reviewing the scope of broadband diffusion, the Brazilian government reveals Broadband National Plans its concern to universalize the access to To increase demands for Internet services, governments worldwide have deployed new technologies and services, notably national programs to incentivize public inclusion. For Brazil, the following programs in underserved areas, such as remote intended to create a demand for this new digital market: or low-income communities. However, •• The Brazil’s Broadband at School Program26 (Programa Banda Larga nas Escolas, the incentives and mechanisms for PBLE): Its goal is to provide broadband Internet access to all public urban schools. universalizing telecommunication services A recently launched Connected Education Innovation Policy aims to provide from FUST address only fixed telephony quality broadband for up to 22.4 thousand public schools, reaching 12.8 million access, resulting in conflicts of interests in students. The program is coordinated by the Ministry of Education (Ministério da designing public policies and regulations for Educação, MEC) and financially supported by the Ministry of Science, Technology, a broader concept of telecommunication Innovation and Communications (Ministério da Ciência, Tecnologia, Inovações e services. Comunicações, MCTIC);
Revisiting the regulatory agenda and •• The Electronic Government – Citizen Service (Governo Eletrônico – Serviço de public programs to reevaluate the scope Atendimento ao Cidadão, GESAC)27: It offers free broadband Internet connection of Universal Services might be conceived to public institutions; to non-profit entities that promote digital inclusion; to public as a dynamic and periodic process, in institutions in the fields of education, health and safety; and to public units located accordance with availability, affordability and in remote, border or strategic areas; accessibility requirements to mitigate the •• The Digital Cities Program (Programa Cidades Digitais)28: It promotes digital digital exclusion countrywide. inclusion for municipalities, by implementing optical fiber network with broadband Internet services to integrate public institutions, as well as offering free Internet access spots to the population. For the municipalities where the initiative is already in place, the goal is to facilitate the access to education, health and safety services;
•• The Brazilian National Broadband Plan (Programa Nacional de Banda larga, PNBL)29: The program intends to provide broadband access to remote and low-income locations. The program aims to improve coverage and reduce costs of broadband access. A variety of other measures has been discussed, as tax exemptions, reduction of broadband licensing fees and acceleration of efforts to make additional radio spectrum available30.
The programs above can be a significant step towards the broadband universalization in Brazil, in line with the initiatives adopted by the developed countries.
62 Insights about Digital Transformation and ICT Opportunities for Brazil
(iii) S inergy between telecom In Brazil, the synergy between electric SIRO and other sectors distribution and broadband can lead SIRO, a joint venture between ESB33 Utility companies can also play an to significant advances in broadband and Vodafone34, has been created to important role in the installation of conduit universalization. Because of the successful deliver broadband network directly and fiber optic cables, integrating it to campaign Light for All (Luz para Todos), to the final consumer, using existing construction projects. One disadvantage electrical coverage has achieved a vast electricity network35. While the joint of this alternative is that providers and territory across the country, reaching 99% venture deploys and manages the telecommunications carriers willing to lease coverage in urban areas and 90% in rural broadband infrastructure, authorized conduit network structure would have to regions, according to IBGE31. The electrical broadband providers are able to negotiate with different parts and several infrastructure emerges as an alternative to openly access it to provide broadband entities depending on where it is located expand the Internet connection to remote Internet services to end consumers36. and who controls the asset. areas. Differently from the technology of ANATEL’s sanction32, Broadband over Power As SIRO expands broadband The optical fiber is already often installed Line, the proposed expansion of the Internet infrastructure, providers may lease alongside utility infrastructures, for instance connection would be enabled by the optical the network, significantly reducing the gas, water, telephony and electricity. fiber already installed by energy companies. costs of Internet services. The process Coordinating optical fiber installation with New business models can emerge from is similar to the benefits presented other infrastructure projects could result this synergy and improve the market’s during the dig once explanation. in considerable savings, as demonstrated competitiveness. during the dig once policy considerations. By promoting the implementation of The National Electric Energy Agency of energy and telecommunications in terms optical fiber networks, the dig once policy (ANEEL) regulates electricity generation, of terminology, requirements, test methods benefits public and private sectors, as well transmission, distribution and and generalities. as communities for it facilitates broadband commercialization in Brazil. In addition, new entrants, affecting competition. In ANEEL is responsible for overseeing In addition, within the MCTIC, the Broadband addition, conduit installation in public right- the concessions and permits of electric Office, as part ot the Department of of-way significantly decreases the costs power services. Within ANEEL, the Access Telecommunications, has as an objective for providing broadband services making and Technical Standards Group, part of the facilitation of the deployment of communities more attractive for new the Superintendency of Regulation of telecommunications infrastructure and the and underserved markets or for existing Distribution Services (SRD), is responsible for expansion of broadband access in Brazil. operations expansions. As a result, the new activities related to sharing of distributors’ Thus, this department plays an important competition structure leads to lower prices infrastructure with other sectors and can role in the elaboration of a connected for consumers. be considered an important enabler of the construction policy. synergy between electrical distribution and The Universal Service Funds, in contrast, broadband in Brazil. The National Telecommunication Agency must be continually modernized to keep up (Anatel), another important agency with technology and service innovations. To facilitate and stimulate the synergy to stimulate the synergy between The government, in turn, should incentivize between broadband distribution and other telecommunications and other sectors, and coordinate projects that promote sectors, it is necessary to create standards aims to promote the development of broadband development to respond to for infrastructure sharing in the construction telecommunications in the country. a new spectrum of services by funding of buildings, as part of the Brazilian The National Information Infrastructure policies that integrate the population to a Association of Technical Standards (ABNT) Committee is responsible for formulating new digital era. attributions, which establish norms for civil proposals and recommendations related engineering in the country. Within ABNT, to the sector that contribute to the According to the OECD (2006)37, USF the Brazilian Civil Construction Committee expansion of information infrastructure advantages are related to its flexibility is responsible for the standardization of in Brazil. Therefore, the Committee could incentivizing universalization rather than civil construction, which includes structural be an important player for the creation of a mandatory regulation for a specific projects, general construction requirements a connected construction policy as one of service or technology provision. In addition, and construction systems. In addition, the its objectives is related to promoting and the Universal Service Funds are more Brazilian Electricity Committee establishes disseminating the information technology transparent, cost-efficient, competitive the rules for transmission and distribution infrastructure. and technologically neutral, as operators
63 Insights about Digital Transformation and ICT Opportunities for Brazil
and carriers are required to contribute to •• Incentivize application service innovations Infrastructure Sharing Model and a common fund. Complementary to the to intensify Internet service consumption; Telecommunications Network universalization policies, other market •• Reinforce broadband network on Infrastructure sharing models enable interventions are suitable to address the education, health, security, and public lower start-up costs and better high costs and low rates of broadband services to improve quality and efficiency efficiency in business operations. penetration in Brazil. Such intervention on operations. Different sharing models exist, driven could address competition regulation, as by commercial and efficiency reasons. shared lines or direct stimulus for new In contrast, on the demand side, strategic Among them, we highlight Mast entrants. stimulations are crucial for developing the Sharing, Site Sharing, Full RAN Sharing country to increase awareness making and Shared Core Network Elements Therefore, a holistic view of both supply broadband services affordable for the and Platforms. and demand sides to ensure the success population. The government has already Thus, infrastructure sharing enables of broadband services in Brazil must taken several initiatives to improve the better utilization of available be carefully addressed. The Brazilian adoption of Internet in remote areas: resources, reduction of installation ICT market is not mature for both sides, •• Open broadband network facilities and operation costs. By avoiding involving risks and large investments. to provide ease of access at public replication of resources, the model institutions, as well as accelerate can reduce the time of installation On the supply side, the current strategies public-sector procurement of services of antennas, for example, besides incentivize all players in the broadband through online platforms; allowing the emergence of new value chain to provide high-speed Internet •• Promote consumption of information at all business models, such as companies connection with optimum user experience. levels of education, reinforcing skills and specializing in the installation of trainings of technologies; infrastructure, towers and antennas, The telecommunications regulatory •• Nurture technical professionals and and that make it available for different agenda and the public programs to expand talents to stimulate innovation; operators. broadband network infrastructure and •• Make broadband available, affordable, That is, the model has the potential to access should be continually supervised and and accessible for the population; reduce operator costs by reducing the evaluated through policies and initiatives to number of antennas, while increasing encourage competitiveness. Briefely, The telecommunications regulatory coverage in new geographic areas and •• Encourage new public-private models agenda and the public programs to expand strengthening competition. to attract investments in infrastructure broadband network infrastructure and constructions; access should be continually supervised and •• Intensify funding support by making use evaluated through policies and initiatives of Universal Service Funds; to encourage competitiveness. They •• Promote competitiveness in the market, might raise the levels of penetration rates incentivizing the expansion of providers by furthering broadband infrastructure operations or facilitating the entrance of diffusion and adoption, as well as reducing new players in the market; Internet connection costs.
64 Insights about Digital Transformation and ICT Opportunities for Brazil
Cloud National security, regulation, costs and local government services are the main drivers of cloud and local data centers in Brazil.
Insights and recommendations for cloud
Cloud
“Cloud – the sky is not the limit” Strategic
Expansion of the government Attraction of data Regulation that facilitates Security and data privacy services provided through cloud centers to Brazil cloud usage
Initiatives that enable supply and demand for cloud: Operational
Supply Demand
Remove legal barriers for the use of cloud services Increase the availability of services in cloud
Develop fiscal incentives for cloud computing Change the procurement mechanism – service instead of product
Create regulation for open data Facilitate the use of cloud services by financial institutions
Examples of concrete actions: Cases • Employment generation vs. installation of data centers (case of Holland – Deloitte)
Source: Deloitte
65 Insights about Digital Transformation and ICT Opportunities for Brazil
The adoption of cloud computing by the Cloud computing includes different types of According to the NIST definition, in the government agencies and organizations service models, such as software, platform Software as a Service (SaaS) model offers considerable advantages to the user, and infrastructure services. consumers have access to the provider’s among them: the reduction of costs, the applications on a cloud infrastructure enhancement for processing information, (web-browser or a program interface). and the improvement of services for the The Platform as a Service (PaaS) model citizens. The general strategic direction offers the user a structured platform to for cloud computing by the Brazilian create their own applications and services government should focus to the expanding SaaS through programming languages, libraries the migration of public services to the cloud, Software as a Service and tools offered by the provider, without attracting more data centers on Brazilian having access to the underlying cloud territory and reducing the existing barriers infrastructure. In the Infrastructure as a PaaS for cloud computing by creating a favorable Platform as a Service Service (IaaS) model, users are provided legal environment and developing fiscal with computing resources such as incentives. processing, storage, network and others to deploy and run different operating systems, Cloud computing is a concept that combines IaaS software, and applications. This model Infrastruture several technologies and, as a result, there as a Service allows significant level of flexibility to the are multiple definitions and interpretations. consumer. The US National Institute of Standards and Technology (NIST) defines cloud computing as “a model for enabling ubiquitous, Source: OECD, Deloitte convenient on-demand network access to a shared pool of configurable computing resources (e.g. networks, servers, storage, Cloud deployment models and their importance applications and services) that can be rapidly provisioned and released with minimal There are four main deployment models for cloud computing, depending on if the management effort or service provider cloud is deployed within an organization and remain private or if it is deployed more interaction”. In a report from 201438, the broadly and the data centers are made publicly available – private clouds, public OECD focuses on the idea of cloud as a clouds, community clouds, and hybrid clouds. service and defines cloud computing as “a service model for computing based on Cloud computing deployment models: a set of computing resources that can be (i) Private cloud: It is characterized by having a structure of unique cloud for a single accessed in a flexible, elastic, on-demand organization, composed of several users. Can be managed and operated by the way with low management efforts”. organization, by third parties or a combination of the two;
(ii) Public cloud: it is the pay-by-use model, where the infrastructure is provisioned for open use. They are the cloud providers.
(iii) Community cloud: a cloud created for a particular group of organizations, usually with common interests. It can be managed by an organization, a group of them, third parties or still a combination of these;
(iv) Hybrid cloud: a combination of two or more implementation (private, public or community), where normally what is less important is intended for the public cloud.
66 Insights about Digital Transformation and ICT Opportunities for Brazil
According to Brasscom39 (2017), the cloud Currently some government institutions According to the Global Connectivity computing was one of the fastest growing have started the process of migrating Index 2018 (GCI), cloud and datacenter sectors in Brazil in terms of revenue, some services and systems to the cloud are technologies considered the basis registering an increase of 51.7% when environment. However, it is observed that for sectors that are data intensive, such compared to the previous year, reaching a there are difficulties to be faced: (i) rigidity as financial services, logistics and retail. revenue of R$ 4.4 billion. In the same year, in the current IT contracting model; (ii) slow They can be considered regional hubs ICT companies’ revenues summed R$ 467.5 delivery of assets (hardware equipment, and platforms for data sharing and access billion. The report also project a growth of or even software in some cases); (iii) the to information. This movement favors 27% per year between 2017 and 2021 in need for a physical location to install the generation of insights in all sectors, the sector. The prospect for growth should the equipment, following hardware- increases the transparency and attraction be driven mainly by investments in new specific safety standards, often requiring of foreign investments. As other industries technologies of digital transformation, such renovation; (iv) need for replacement move to a digital environment, these two as Internet of Things, Big Data and Artificial of equipment after life cycle (or after technologies will be the basis for meeting Intelligence. finalization of manufacturer’s warranty); the existing demand. and (v) investment in hardware and capex Government cloud, in particular, relates to (capital cost) while the model of cloud is The 2018 edition of the United Nations products and computing solutions in cloud primarily marketed as a service (opex - E-Government Survey examined how developed and used by organizations and operating cost). e-government and information technologies government institutions. can be used to build better societies. Expansion of cloud utilization would allow The UN has measured e-government’s While public institutions are very the scalability of government services, ie effectiveness in delivering public services concerned about data security and privacy, they may be adjusted according to their seeking development standards, as well as governments are expected to deploy demand and possible peaks of use. countries and areas where the potential private cloud services at twice the public of Information and Communication cloud rate by 2021, according to Gartner. Although some federal agencies have Technologies (ICT) and e-government has already begun the process of migrating to yet to be fully developed. In this research, it For the successful adoption of the cloud systems, some manual processes was emphasized that an open governance governmental cloud in Brazil, some points still persist. However, those available online approach, composed of clear standards and are considered strategic. to the population significantly reduce wait guidelines, is necessary. He also pointed times that were previously spent in queues out that countries should recognize the and allow bureaucratic processes to be consequences of placing cyber security completed within minutes without the user as national security on the issue of data having to leave home. storage and cloud utilization, as this may limit the widespread adoption of ICTs, Hosting government services and reducing confidence and leading to a systems in a cloud environment also possible division of geographical areas. simplifies systems management models, while reducing the costs associated with maintaining and updating an infrastructure dedicated to the operation of those systems. Citizens would still be able to take advantage of a more interconnected government, having their information distributed between different organs, and therefore the provision of public services provided by the state to the citizen directly, would be more efficient.
67 Insights about Digital Transformation and ICT Opportunities for Brazil
i. Expansion of the government services large amounts of processing and computing Moreover, cloud services used by the provided through cloud power, which are hard and expensive for government allow data sharing and facilitate The major benefit from using cloud services companies to provide, since their resources the collaboration between different agencies is the cost reduction. Behind the lower costs and infrastructure are limited. and organizations, which has the potential of cloud computing lies the concept of it being to significantly reduce the time span of a measured service, not a product. As such, Moreover, using the cloud service allows the bureaucratic processes related to it does not rely on an incremental Capex for significant flexibility when it comes government services. approach. Spending on physical products, to payment models, which include using such as hardware and infrastructure, which subscription plans or the “pay-per-use” Finally, using cloud computing allows in general have higher costs for acquisition, model, which implies payment only for the government agencies to offer a variety of are not needed, since the necessary amount of IT services effectively consumed. self-services for the citizens, for instance, equipment is provided by the seller. allowing them to make service requests Migrating to the cloud leads to positive online and follow their status, to monitor In general, it is cheaper to hire an application impacts related to the IT staff of the their energy and water consumption, service, such as SaaS or IaaS for instance, government agencies. Using cloud to access their medical records, etc. In instead of investing in hardware, software computing allows IT workers to focus on addition, the government can use cloud licensing and internal training of the staff specific projects instead of dealing with solutions (SaaS, PaaS and IaaS) for the to access information technology or hiring maintenance and updates of the local creation of public data repositories, storage, skilled personnel. In addition, the increased system, which becomes the responsibility of monitoring, asset management, threat and use of new technological applications such as the cloud service provider. fraud detection. Most of these applications e-commerce, big data and IoT are related to are either new applications or traditional applications that have been rewritten to run on a cloud platform. Cloud – the sky is not the limit The benefits related to cloud computing – delivering better services in an effective way with lower costs – should be priority for the public institutions in every country. According to Gartner’s estimates, government use of public cloud services 1 2 3 4 around the world will expand significantly in Expansion of Attraction of Regulation Security the government data centers that facilitates and the next few years, with spending forecasted services provided to Brazil cloud usage data privacy through cloud to register an average growth of 17.1% per
Source: Deloitte year through 2021. Justice, health, transport and other public entities in countries such Migrating to cloud computing has numerous advantages as the US, Singapore, Canada and the UK for the government. have already migrated to cloud.
Cost Flexibility Reduction Government and Agility Cloud
Better Services Better services and Operational for the Efficiency population
Collaboration and Data sharing
Source: Deloitte
68 Insights about Digital Transformation and ICT Opportunities for Brazil
It is important that Brazil follows the global infrastructure and data centers in the wave of migration to cloud computing of country. Moreover, there are possibilities The public company Dataprev government services. For this purpose, for building data centers in the North and that offers information and initiatives need to be adopted for Midwest regions of the country. communication solutions for the stimulating public agencies and institutions improvement and execution of social on all levels (federal, state and local) to move In terms of the process of digitalization of the policies in Brazil has three data their data to the cloud, to become more government administration and the supply of centers in the country, located in digitalized, and to offer more services to the public cloud services, Brazil has been moving Brasília, Rio de Janeiro and São Paulo. citizens based on cloud computing. This can forward with the support of institutions, The company specializes in processing generate a wave of domestic demand for such as the Federal Data Processing Service and handling large volumes of data. cloud services by the public sector, leading – Serpro. This is a public-owned IT company Among the services offered by to a necessity of higher supply and thus, under the Ministry of Economy, with the Dataprev are processing the payments the need of the construction of new data objective to modernize the government of social security benefits and of the centers on national territory. agencies across the country. social security information of the Federal Revenue Service. ii. Attraction of data centers to Brazil In recent years, Serpro has developed According to CloudScene40, currently there several solutions for improving the are 100 data centers located in Brazil41. relationship between the government and integrated and several advanced analytical 42 The United States has 2,425 data centers, the citizens, and for supporting state and tools for data analysis are available . which shows how far Brazil is in this context municipality authorities. An example of a and reflects the existing opportunities for solution using Data Lake and Big Data built In order to ensure its successful digitalization capacity expansion of this technology. by Serpro is the Federal Government’s Data process, however, the Brazilian government Analysis Platform - GovData, the creation needs to incentivize the creation of cloud Gartner’s research confirmed this of which was also supported by Dataprev data centers on national territory. The use conclusion about Brazil, adding that there and the Ministry of Planning. In this of national-based cloud computing services is a shortage of corporate computing platform many governmental databases are is associated with several advantages for consumers in comparison to hiring such a service from abroad.
Canada: since February 2017, the Japan is one of the top markets The major advantage of storing data on Canadian government moved to the for growth in cloud services in the national territory is related to the fact that cloud, using the Shared Services Canada world. The government has been the cloud computing services will follow (SSC). The SSC is a government initiative strengthening the cloud infrastructure national rules. Thus, if a decision is made to created in 2011 to provide IT services to in the country through the “Digital store data outside of the national territory, all government agencies across Japan Creation Project”, since 2009. As it is important to get familiar with the risks the country. These services include a result of the initiative “Kasumigaseki and legal consequences of doing so. In standardized e-mails for all departments Cloud” (Kasumigaseki is a district of addition, if the data center is located in a and agencies, consolidation and Tokyo where the biggest institutional country with strict policies on accessing modernization of the government’s data buildings are located) all government confidential data, the stored information centers, transformation of ICT systems were moved to cloud, may not be well protected from a the communication and data a national archive for digitalized confidentiality aspect and may be accessed sharing between organizations, the government documents was created without authorization. procurement of technology devices and and a number of mobile applications the detection and prevention of cyber to access government services were To encourage the use of cloud services and technology attacks. Currently, the published. This initiative was crucial for of national companies, the Brazilian adopted cloud services will handle stimulating the development of cloud government imposes an expressive tax unclassified government data, such computing and to the country providers. burden for contracting similar services as archived material, government- abroad. This measure, however, is not generated open data and big data sets enough for boosting the installation of new generated by the scientific community, data centers across the country. Additional which will help citizens to access new efforts related to tax exemptions and digital services and programs. fiscal stimuli are needed for turning Brazil
69 Insights about Digital Transformation and ICT Opportunities for Brazil
into an attractive location for data center operation is normalized, capacity is reduced The “Portaria Nº9” of the Institutional installation. to minimize costs. Security Office (GSI), from March 15th, 2018, established principles, Moreover, the government has the power 4. Demand for professionals: The installation guidelines and responsibilities related to create demand for the installation of of cloud servers, in addition to addressing to Information Security for the national data centers by adopting initiatives sovereignty over the information installed in processing of information in cloud that stimulate the migration of government national territory, generates a demand for computing environment by the organs agencies and systems to the cloud. high-qualified professionals. and entities of the federal public administration in Brazil. To ensure the success of the country’s iii. Regulation that facilitates cloud According to the new regulation, digitalization process, the Brazilian computing cloud computing is defined as a government must encourage the creation In 2017, Brazil presented a four-position computational model which allows of data centers in the national territory to improvement in the BSA Global Cloud access on demand to a shared set stimulate the generation of cloud services. Computing Scorecard43. Despite the of computing resources (networks, The use of national-based cloud computing Brazilian advance according to the servers, storage, application and services is associated with several ranking, the research reveals that the legal services) regardless of its location. advantages for consumers and users, which environment and the country’s regulations The text highlights the character of are enhanced when the service is based in for cloud computing still limit innovations. cloud computing technologies in the country. The main aspects are: offering benefits of cost-effectiveness The General Data Protection Regulation and efficiency. However, as pointed 1. Reduced costs: Using cloud computing (Lei Geral de Proteção de Dados, LGPD), out, in order to ensure the security services reduces the use of data centers, sanctioned by the Presidency of the of information, measures must be which reduces the number of servers and Republic in August 2018, aims to ensure adopted to preserve the interests software spending, without impacting the greater control of citizens on their personal of society and the sovereignty of organization’s IT capabilities. Cloud costs are information by requiring explicit consent the State. Public administration flexible, as fees are paid based on the use for the collection and use of data, either should balance the advantages of server and infrastructure capacity as it is by the public authority or by the private and risks associated with migrating needed. sector, and requires the options to view, to cloud computing services with correct, and delete personal data and respect to information security and 2. Data accessibility: Cloud service providers information. The LGPD thus aims to protect communication management. Thus, are extremely flexible and maintain high the privacy of people by establishing limits the regulation mentions that Brazilian reliabilty levels uptime, with rare connection and guidelines for the use of personal legislation prevails over the laws of problem exceptions. information. Even though the initiative other countries, which is in line with reveals advances in public policies related the movement of other countries on 3. Capacity scale: Cloud usage can be to information protection, there are still the subject. adjusted according to capacity demand, barriers on software and online applications for example, server crashes. Once the that prevent the implementation of cloud services.
In Brazil, the existing current legislation and regulation is not completely adapted to the changing reality of digitalization and represents a barrier for the adoption of new technological solutions, including cloud technology.
70 Insights about Digital Transformation and ICT Opportunities for Brazil
Removing legal barriers and unnecessary outside of the national territory. Currently, regulation can boost the adoption of the total tax on such services coming from The EU Commission has identified the cloud services across the country, thus, abroad is 39%, according to the Regional potential of open data as an enabler stimulating the development of a digital Accounting Council of the State of Rio for the future digital transformation economy in Brazil. Moreover, policy makers and as a driver of strengthening need to examine the tax implications of de Janeiro (CRC-RJ), and can reach 55% the EU countries’ competitiveness. the fiscal policy regarding the use of cloud depending on the way the contracting of the In 2015, the Commission launched services and the construction of data service is made, as well as on the type of the the European Data Portal, whose centers. Issues related to data privacy and service. This can increases significantly the objective is to collect metadata security must also be considered, since final price of the provided service. from the public sector from the EU cloud applications for e-government deal member countries. According to the with sensitive data. Moreover, data centers and providers of 2017 Open Data Report developed by cloud computing are subject to corporate Figshare, which analyzes countries’ Considering the higher taxes, the cost of taxation as any other private organization in progress in open data readiness and services in the country is higher than in the country. An initial step towards solving portal maturity, the EU28 countries other countries around the world. Since the issue with the high corporate taxes are performing very well in these cloud computing is a service, the use of categories, with a maturity level of this technological solutions is subject to for these entities was taken in 2017 when 73% and a readiness average increase high service taxes, increasing the consumer the Brazilian Commission for Science and of 14.5 percentage points since 2015. prices and leading to low demand. Technology, Communication and Computer Science (CCTCI) approved a change in the Since 2014, the Brazilian government Lei do Bem – Law 11.196/05 that creates imposes taxes on the use of data centers fiscal incentives for companies that perform and cloud infrastructure providers located research and development in technology. through hiring experienced and qualified According to this change, all data center professionals that understand the concept operations across the country are put of cloud computing. under the special taxation regime for the Creating regulation for open data is another In April 2018, the Central Bank of export of information technology services step that can considerably facilitate the Brazil established a new cyber (REPES – Regime especial de tributação para adoption of cloud computing in the country. security policy for financial institutions a plataforma de exportação de serviços de Open data has been gaining importance through the Resolution 4,658 and Tecnologia da Informação). Thus, companies with the development of the ICT sector. relaxed the rules regarding storing that export software and provide computer It is considered one driver of economic data in a cloud. The new resolution services become exempt from federal taxes development, efficiency gains, and benefits allows banks to hire cloud service on imports of goods and services. for the society and is associated with higher providers in Brazil and abroad, with transparency of government policies and prior authorization from the Central Another barrier for cloud computing in actions. Bank. Brazil that can be overcome by changes in the existing regulation is the current Therefore, it is crucial that public Before the issue of this resolution, procurement mechanism, which is organizations and agencies in Brazil adopt financial organizations in Brazil did inadequate, considering the concept that open data solutions and make a priority not have the right to use data centers cloud is a service and not a product. The the idea of data sharing. The open data located outside the national territory process of hiring cloud services should take policy of the government brings benefits as a national security protecting into account the true nature of this type to all stakeholders - citizens, businesses, measure, driven by the fact that banks of technology. Since cloud is a relatively researchers, journalists – since it enables store sensitive information about their new concept, it is hard for consumers from improved decision making and creates clients. The resolution still maintains public and private sectors to understand transparency. The government, however, the banks’ responsibility to preserve the nature of the offered solution. They must take in consideration the issues the information of their customers tend to expect the delivery of a physical related to security and privacy. Building and they have the right to decide product, instead of a service. In this way a well-structured cloud computing which relevant information should be government biddings must be adjusted in infrastructure can allow for the public usage outsourced to an external supplier. order to properly describe the solution and its characteristics, which can be achieved of private data in a secure way.
71 Insights about Digital Transformation and ICT Opportunities for Brazil
€ Case
In Europe, the Dutch are among the Infrastructure Mass market Enterprise hosters Small local players frontrunners in the area of digital cloud giants hosters infrastructure (Internet connectivity, •• Large international •• Aiming at larger •• Standardized •• Small companies colocation housing and hosting). players enterprises portfolio of hosting •• Originating from •• Offering •• Large contracts and services web hosting and In 2013 the Netherlands had a world class infrastructure as specific needs •• Aiming at small and internet access a service, with medium businesses digital infrastructure. The real value of •• Often in •• Evolved into shared storage and servers combination with and dedicated the digital infrastructure sector, however, on-demand •• Large scale with transformation and international hosting and cloud lies in internet economy and in a broader integration services •• Standardized offer activities •• Ability to provide digital society. The picture emerges that local and Digital Infrastructure cannot be separated personalized service from a successful digital society, placing Source: Deloitte the Dutch in a favorable position to profit from digital growth.
Region Supply m2 Availability m2 Increase last year Supply m2 per € bn GDP The hosting and infrastructure cloud market was fragmented with many small London 298 52 7.2% 138.9 players and larger international players. Frankfurt 159 22 3.9% 56.2
Paris 111 14 4.7% 52.9 The Amsterdam region is part of a leading Amsterdam 101 16 6.3% 168.3 group of tier-1 data centers and shows strong increase in supply. Source: Deloitte
London, Frankfurt, Paris and Amsterdam Amsterdam has shown a strong increase The market for data centres is characterised form the leading group of colocation data in the past year, smaller than London but by a combination of large global players (e.g. centres hot spots in Europe. There is a larger than Frankfurt and Paris. Telecity, Equinix) and many smaller local large distance between this leading group providers. of four and the runner up on position 5 This position is the result of the (Madrid). combination of several criteria for data The presence of most major global data center location decisions. center providers in the Netherlands is prove
Source: Deloitte
72 Insights about Digital Transformation and ICT Opportunities for Brazil
€
2 Colocation supply m per € bn GDP Internet Connectivity 180 1. Extremely well connected to the core Internet (terrestrial & submarine cables) 160 a) Lowest latency to other major Internet hubs 140 b) Large available bandwidth 2. Presence of all major carriers and MAS-IX 120
100 Energy
80 3. Availability of required electricity capacity (production and distribution) 60 4. Reliable power supply 40 5. Favorable electricity prices (compared to the EU average) 20 Geographical location 0 6. Good accessibility (Schiphol), central location in Europe Amsterdam London Frankfurt Paris 7. Small country with a neutral position Source: OECD, Deloitte Political and economic climate of the country’s attractiveness. SaaS and 8. Economic and political stability PaaS are two of the Digital Infrastructure’s 9. Highly-educated and multilingual workforce closest relatives, generating 5,700 jobs in 10. Focus on international trade the Dutch economy. 11. Favorable laws and regulations 12. Favorable tax climate
As a result the Netherlands is hosting the Spending on Saas per capita (in €)
top of the world’s technology and Internet 13 €265 mln companies as gateway to Europe and the NL 18 €325 mln Internet. 22 26 Bpaas Saas Large investments in data centres 13 Paas UK 16 €35 mln within the Netherlands by corporate 21 multinationals like Google and IBM 26 Cloud security €45 mln generate additional employment. 6 DE 7 According to Etro (2009), fast adoption 9 11 of innovative cloud services could Employment have created as much as 10,800 new 7 FR Dutch SMEs during the past 5 years in 8 10 retail, wholesale, tourism, transports, 12 communication, and real estate & 2 2012 YR business activities. ES 2 2013 YR 3 2014 YR The Netherlands has a leading position in 3 2015 YR 5,700 Internet exchanges, data center housing Source: Gartner’s IT Spending Forecast Report; CBS Database:Deloitte analisys and hosting, three sectors that together with telecommunications form the Digital Infrastructure.
73 Insights about Digital Transformation and ICT Opportunities for Brazil
Safe city The most relevant investment in public safety technology is also the less costly: definition of open standards. Artificial intelligence and facial recognition also play an important role.
Insights and recommendations for safe city
Safe city
“First safe, then smart” Strategic
Security improvement and Efficient funding for security Unified strategy among the crime prevention through Standardization expansion three levels of government investment in intelligence
Initiatives that enable supply and demand for safe city: Operational
Supply Demand Invest in intelligence and promote the synergy with the Regulate the use of private data as a source of existing infrastructure information for public security Create a tripartite organ that promotes public Increase citizens’ awareness of the benefits and private agencies collaboration* of technology solutions to public security
Incentivize the use of Open Platform and Open data Create specific credit lines for Safe City projects
Examples of concrete actions: Cases • Insights from the city of Campinas
* Tripartite Organ is an entity composed of representatives of the federal, regional and municipal spheres. Single System for Public Security (SUSP, Sistema Único para Segurança Pública), under the responsibility of SENASP, is an entity created in June 2018, after the first edition of this study. SUSP’s mission intends to promote, at all three levels of the government, integrated and cooperative actions among public security institutions, such as civil, military and Federal policies, security secretariats and city guards. Source: Deloitte
74 Insights about Digital Transformation and ICT Opportunities for Brazil
The implementation of safe city solutions as in major events or in the occurrence solutions, as well as the development can help Brazil solve one of the major of natural disasters. The coverage of of models for efficient funding of public problems that it is currently facing – the low communication networks used by security projects are also crucial for the level of public security in the cities. For this security forces should be comprehensive successful implementation of the concept of purpose, the government should prioritize so that agents do not lose the signal of safe cities across Brazil. adopting technological projects for solving communication during operations in which the various challenges of public safety in they need to move. Finally, it is important The fast development of digital technologies urban spaces and make cities “first safe, that these critical communication systems offers innumerous possibilities for turning then smart”. have secure encryption. cities around the world smarter. According to Deloitte’s definition, cities are considered The strategic direction adopted by the Currently a variety of standards are used smart when investments in human, social government to improve public safety in for security communications, such as capital, transportation and communication cities across the country should focus LTE, TETRA, Tetrapol and P25. Among infrastructure sustain economic on the use of intelligent solutions such these, the LTE standard is the one that development and high quality of life, with as video analysis technologies, motion has the greatest possibility of delivering all a wise measurement of natural resources. sensors, artificial intelligence and big data. necessary solutions for the public security Such investments related to improving The deployment of a nationwide mobile communication systems. The technical public security in urban areas around the communication network that enables an work to produce improvements in the LTE world can turn cities safer, resulting in a integrated communication between armed standards that meet the needs for critical concept of a safe city as an emerged niche forces and public security institutions is communication is carried out by 3GPP of smart cities. also an important step towards safety and (3rd Generation Partnership Project), an intelligent model. organization formed by telecommunications According to the Safe Cities Index 201744, associations that currently has more developed by The Economist Intelligence Many public security agents in Brazil rely than 400 member companies and Unit, which ranks 60 cities around the only on equipment restricted to voice institutions. 3GPP periodically releases world through the analysis of 49 indicators communication that are unable to transmit new specifications for mobile network among digital security, health security, multimedia data clearly and quickly enough technologies, offering increasingly more infrastructure security and personal to be used during situations of risk. In functionalities for the communication security. Tokyo, Singapore and Osaka were addition, in regions where the technology systems used by the public security forces. the top three safe cities in 2017. Buenos used by the police communication is LTE technology will become the standard Aires is the top city of the Latin American still analog, criminals often monitor the for broadband networks used for critical region, ranking on 29th position. frequency used by them, anticipating communication. Therefore, it is imperative actions and eliminating the surprise effect that Brazil makes the necessary investments The ten cities best classified at the Safe of operations. to enable its implementation. Cities Index – Tokyo, Singapore, Osaka, Toronto, Melbourne, Amsterdam, Sydney, Meanwhile, there are radio communications Another necessary measure is the creation Stockholm, Hong Kong and Zurich – have technologies available for critical missions of a unified strategy between the three high or upper middle income per capita. that allow the use of smartphone-like levels of government: federal, regional However, in all regions, youth violence is devices capable of transmitting their GPS and local, that enables public agencies a problem, especially in regions where position, as well as videos and images. integration and collaboration. Defining the youth unemployment rate is high. The equipment also allows the inclusion standards that promote the use of open Young people who are exposed to social of strategy plans, maps, as well as conducting queries to criminal records. The data captured by the equipment can be transmitted in real time to command centers, so it would be possible to know in real time what the police officer sees The use of integrated solutions involving video, data and and hears. analytics by law enforcement officials for dealing with Communication networks used in critical public security has been gaining significant importance in missions must not become unavailable during periods of high network traffic, such cities around the world.
75 Insights about Digital Transformation and ICT Opportunities for Brazil
inequality, poverty and exclusion tend to Another technological advancement that Within this context, raising citizens’ have risk behavior, such as engaging in has been instrumental in increasing public awareness on the importance of their active criminal activities, violence and substance safety are the applications that allow users participation in the reporting of criminal abuse. These problems also affect particular to send information about the occurrence acts, vandalism, fires and other emergencies regions of Latin America and the Caribbean, of accidents, fires and criminal acts. The is essential for people to increase their which ends up reflecting in the security “Fogo Cruzado” app, for example, was individual security and also for them to indexes of their cities. To support the developed, so locals and tourists could send play a key role in enhancing security in mitigation of urban violence, cities have a information in case they witness shootings their communities. Moreover, information growing number of safe city technologies cases. In this way, application users can be submitted by citizens can be aggregated that generate different positive impacts alerted to move away from risk zones. In São and combined with health and education on public safety and the community. The Paulo, the Municipal Department of Urban data. In this way it is possible to plan police installation of noise sensors contributes Safety launched a similar app known as “SP operations with more intelligence and to the agility in detecting incidents or any + Segura” which also counts on reports from also to invest in public policies for crime kind of abnormal agitation in cities. CCTV citizens to map occurrences. prevention in a more efficient way. cameras when combined with artificial intelligence technologies, such as face In some countries there are also According to the ranking Connected Smart recognition, locomotion analysis and applications that allow authorities to send Cities developed by the company Urban behavior analysis, become a powerful alerts to the population, such as Amber Systems45, the majority of intelligent and resource for detecting criminal behavior alerts in the United States. These alerts are connected cities in Brazil is concentrated and suspicious activity, making it difficult to used to inform the abduction of children in the Southeast region. The North region escape and conceal identity by criminals. and allow people to send videos, photos remains the only one with no representants These solutions have become increasingly or any information that may contribute among the top ten. popular, playing an important role in to the police operation. In 2017, a total of combating urban violence in large cities such 868 children were rescued through this In 2017, São Paulo ranked first among as London, Tokyo and Hong Kong. resource. the 700 analyzed municipalities in the country, followed by Curitiba and Rio de Janeiro. The ranking considers 70 different indicators in the areas of mobility, urbanism, environment, energy, Safe Cities Index 2017 technology and innovation, education, health, entrepreneurship, economy and Ranking Ranking City Points City Points 2017 2017 governance. 1 Tokyo 89.80 16 Wellington* 83.18 2 Singapore 89.64 17 Brussels 83.01 Considering the top cities in Brazil in terms 3 Osaka 88.87 18 Los Angeles 82.26 of security, Urban Systems also collected and analyzed data from crime indexes. 4 Toronto 87.36 19 Chicago 82.21 Vinhedo, located in the state of São Paulo, 5 Melbourne 87.30 20 London 82.10 ranked first among the most secure cities in 6 Amsterdam 87.26 21 New York 81.01 Brazil in 2017. Vinhedo is characterized by 7 Sydney 86.74 22 Taipei 80.70 a significantly low crime rate compared to 8 Stockholm 86.72 23 Washington. DC 80.37 other cities in Brazil, with 295 municipalities in the state of São Paulo having higher 9 Hong Kong 86.22 24 Paris 79.71 homicides rates than Vinhedo. The city 10 Zurich 85.20 25 Milan 79.30 invested R$ 220 per inhabitant on public 11 Frankfurt 84.86 26 Dallas* 78.73 security in 2017, which was reflected in the 12 Madrid 83.88 27 Rome 78.67 increase of the rank of the city from third 13 Barcelona 83.71 28 Abu Dhabi 76.91 place in 2016 to first place in 2017. 14 Seoul 83.61 29 Buenos Aires 76.35 15 San Francisco 83.55 30 Doha 73.59
* New cities Source: The Economist Intelligence Unit Limited 2017
76 Insights about Digital Transformation and ICT Opportunities for Brazil
Different initiatives related to safe city different problems related to public safety. facilitates the communication between solutions have been implemented in The best results can be achieved when they population and law enforcements. In cities around the world. In general, these are all implemented together and operates general, cities start with small pilot projects initiatives include smart street lighting, simultaneously. to test innovation technologies and tend to drones for risk assessment, data-based choose solutions that integrate well with the crime prevention programs, predictive City officials in Brazil implement solutions existing platforms and can follow up the fast policing, emergency apps, and equipment for safe city development with traditional changes in technology. for identifying gunshots, which solve approaches, such as mobile apps that Furthermore, as a first step widely adopted to increase public safety, cities often begin Ranking Ranking Municipality (State) Points their technology investments by installing 2017 2016 1 1 São Paulo (SP) 33,197 Best ranking per region cameras for monitoring, which are used for inhibiting the practice of criminal 2 3 Curitiba (PR) 32,472 Central-West activity and to support research of crimes Brasília – DF (7th place) 3 2 Rio de Janeiro (RJ) 32,125 by the authorities. This solution, however, 4 5 Belo Horizonte (MG) 30,785 Northeast is inefficient for the prevention of urban th 5 6 Vitória (ES) 30,426 Recife – PE (10 place) crimes. 6 7 Florianópolis (SC) 30,281 North Palmas - TO (15th place) When Brazil hosted the men’s soccer world 7 4 Brasília (DF) 29,987 Southeast cup - FIFA Brazil 2014, the government 8 10 Campinas (SC) 29,788 São Paulo – SP (1th place) created the Integrated Command and 9 13 São Caetano do Sul (SP) 29,418 South Control Centers (CICCs), located in each of 10 9 Recife (PE) 29,339 Curitiba – PR (2nd place) the 12 host cities of the tournament, which Source: Connected Smart Cities 2017, Urban Systems
Drones for risk assessment Using drone technology allows for searching accidents and crime scenes, finding fires, detecting Smart street lighting heat, etc. Data-based crime prevention programs Smart street lighting does not only save energy consumption, but it Big data analysis can help identify regions with increases public safety, as well. high crime rates and violence.
Safe City
Predictive policing Identifying gunshots Intelligent technologies based on Acoustic sensors installed around real-time face-recognition and the city can help detect gunshots license plate scanning can be and determine their exact used to reduce crime. Emergency apps location. Smart apps can be used by citizens to denounce crime and Source: Deloitte violence, send alerts and enter in contact with police officers. 77 Insights about Digital Transformation and ICT Opportunities for Brazil
remained an important legacy for national Some cities, such as Campinas, have smart The existing projects implemented in cities public safety. The CICC is an organ that has cameras that allow facial recognition. These across Brazil can be categorized into three the capacity to articulate the elaboration cameras can also identify clues to suspicious main types: monitoring crime through of the protocols of integrated action, as activities and agglomerations, besides cameras and sensors; mobile apps for well as to promote the relationship and the detecting stolen vehicles by reading their denouncing crime, violence and other interlocution between the military police, license plates and reporting the direction irregularities; and intelligent systems for organs of protection and civil defense. It the vehicle has taken, significantly reducing collecting and analyzing data. aggregates emergency telephone answering the search time for criminals. services, video monitoring, intelligence In general, cities in Brazil have invested service and production of statistical data. Therefore, municipal officials need to in isolated and rather sporadic initiatives The analysis of the images is carried out in prioritize investment in smart solutions, without necessarily following a specific real time by the operators of the CICCs. which will potentially make resource strategy for the development of safe city management more efficient and effective. solutions that promote collaboration among agencies and regions. Some municipalities have tried to implement joint solutions with other nearby cities in the region as a way of sharing investment costs.
Safe City Initiatives in Brazil In order to boost the implementation of safe city solutions in Brazil it is important Three main types of initiatives: to define a strategic direction and specific goals to be achieved by municipalities. It is crucial that city officials know where to start and what they want to achieve in terms of Monitoring crime and violence Mobile apps for denouncing Systems with intelligence increasing public security through the use of through câmeras and sensors crime and irregularities technology. Example: Rio de Janeiro (RJ) Example: Manaus (AM) Example: Campinas (SP)
Installation of sensors detecting Mobile app “Aviso polícia” for Implementation of cameras with noise (gunshots and explosions) informing immediately the police intelligence for automatically and informing the authorities of crimes or violence in buses detecting vehicle registration automatically. and other means of collective plates and tracking. transportation.
Source: Deloitte
Safe city First safe, then smart.
1 2 3 4 Security improvement Efficient funding for Unified strategy Standardization and crime prevention security expansion among the three through intelligent levels of government solutions
Source: Deloitte
78 Insights about Digital Transformation and ICT Opportunities for Brazil
(i) Security improvement and crime and prevention process faster, thereby The government, however, should consider prevention through intelligent optimizing the operations of the command that investment in equipment is not enough solutions center. for the development of solutions that effectively deal with crime and violence. It Funding is one of the biggest challenges for One way of reducing the government is necessary that systems involving some municipalities and local governments, once expenses with equipment is sharing private degree of intelligence are implemented budgets are limited and security secretariats companies infrastructure to facilitate the together with the equipment in order to need to make resources available for access to images and data from private achieve positive results related to increase diversified defense policies. security cameras by police officers. in public safety. Integration between the already installed In general the investment needed for safe private network of surveillance cameras with (ii) E fficient funding for security city projects is directed towards cameras the city monitoring system can be beneficial expansion and network equipment, such as routers, the reduction of government costs and for The majority of the investments made in switches, and storage, while intelligent the safety of cities. security by the Brazilian states depends on solutions based on facial recognition and federal government transfers. While about artificial intelligence are cheaper. Therefore, Different studies have shown that initial 90% of budgets are allocated to salary municipality officials need to prioritize investment in public safety innovation payments, charges and pensions, 9% is spent investment in smart solutions, which will leads to considerable benefits in terms of on the cost of public administration, leaving potentially make resource management economic growth, productivity, innovation, only 1% for investment in new technologies. more efficient and effective. national competitiveness, job creation This is a situation where Public Security and reduction in crime. According to IHS Secretariats have little or no flexibility. In Public safety can be significantly enhanced Markit46, there is a direct relationship 2016, for example, States and the Federal by using artificial intelligence (AI) solutions between government investment and the District spent R$67.3 billion with security. As based on sophisticated surveillance benefits of a safe city project – both in terms part of this amount, only 0.7% accounted technologies, monitoring standards, of safety results and social benefits. for intelligence and information expenses. integrating criminal databases, and combating violence.
AI can help detect patterns, predict criminal Shenzhen case: Shenzhen, located near Hong Kong, is one of China’s most important behavior, track objects and people, and cities and serves as an example for the adoption of technological solutions for solving ensure quick responses to incidents and problems related to public security. A city and district two-level video platform has crimes. Many cities around the world have been installed, collaborating with the city’s ID system, transportation, and federal already adopted secure city solutions that police through government cloud. The adopted solution combines both infrastructure involve intelligent command and control and intelligence. There are more than 1.3 million social cameras for monitoring and centers using AI, helping to optimize surveillance that convert video format to a unified standard, as well as key intelligent operational costs and resources, making technologies, such as face recognition (>99% recognition), vehicle registration plate sense of the collected data available recognition, open intelligent video analysis platform compatible with multi-vendor through cameras and sensors. In addition, algorithm. These solutions led to less time and costly search for suspects, lower number these solutions make the crime detection of emergency calls, and higher people’s satisfaction.
20 594 98 The foundation stone 60 for the development of 272 safe cities is investing in a 4 smart way, i.e. in intelligent Search Suspects, days 110 Emergency Calls, thousand People’s Satisfation, % solutions that lead to 2012 2016 higher public safety with Source: Huawei lower expenditures.
79 Insights about Digital Transformation and ICT Opportunities for Brazil
It is therefore necessary to find new ways of There are different lines of credit available Cities acting by themselves cannot to complementing public safety resources so to municipalities for the implementation migrate to safe cities efficiently and that resources are available for investments of public safety projects, such as those effectively without the help of a centralized in safe city technologies. offered by the National Bank for Economic guideline developed by the national and Social Development (BNDES). In 2018 government. Therefore, policies should In June 2018, the Brazilian government the board of directors of the development be enacted on a national level to address signed a provisional measure to relocate bank approved a security plan to provide challenges that cities alone are unable to part of the resources of the sports lotteries resources in the coming years to the deal with. administered by the bank Caixa Econômica Federation’s entities: R$32 billion for states Federal, currently destined for sport, to and R$10 billion for Brazilian municipalities. A first step towards the creation of a public safety. The expectation is that by However, several Brazilian states will have national public security strategy was given in 2022 the amount destined to the National difficulties in accessing the credit line February 2018, when, through a provisional Public Security Fund, derived from lotteries disclosed due to difficulties in offering measure, the Ministry of Public Security was will be R$4.3 billion. guarantees for the payment of the credit created. The functions of the new ministry granted. In addition, the application process include the coordination and promotion for such lines of credit is complex and there of public security throughout the national Nairobi case: As an attempt to fight is a lack of well-developed projects. territory with the cooperation of states and the raising crime rate in Nairobi, municipalities. The structure of the Ministry the Kenyan government invested in Rethinking funding strategies for public includes the Federal Police Department technology to increase the urban safety is essential. New ways of accessing (DPF), the Department of Federal Highway safety. The first step of the project complementary funding should be Police (DPRF), the National Penitentiary taken in 2014 was related to upgrading created, without compromising the public Department (Depen), the National Council the infrastructure to ensure a budget. Above all, the destination of the of Public Security (Conasp), the National holistic solution for the entire city. funds must be monitored to guarantee Council of Criminal and Penitentiary Policy An integrated Emergency Command an efficient application of the resources. (CNPCP) and the National Secretariat of Center for managing emergency calls Thinking about financing also involves a Public Security (Senasp). was created, over 1,800 cameras were governance architecture that can guarantee installed across the city and a video the establishment of systematization In addition, the project for the creation management and storage system was mechanisms, federative responsibilities of the Unified Public Security System established. Moreover, since 2015, and monitoring of the projects developed. (SUSP), linked to the Ministry of Public the city officials have been investing It is therefore necessary to develop robust Security, was approved in June 2018. The in intelligence in order to increase the performance indicators so that common SUSP establishes the integration of the benefits of the installed surveillance goals and objectives can be established. organs and institutions of public security cameras across the city, which included and social defense in Brazil by means of a system for automatic number plate (iii) U nified strategy for safe city among information sharing, knowledge exchange, recognition and the implementation of the three levels of government and combined and planned operations. The video analytics. IHS Markit estimates Individual and sporadic solutions related to new system will establish a 10-year National that an increase in government safe cities require separate infrastructure Public Security Policy with the objective of investment in city safety in Nairobi costs, do not allow sharing of information defining goals and actions for the member resulted in a rise in safety results of between different agencies and go against bodies. States and municipalities will have 24%. The city registered 46% reduction the idea of collaboration between all two years to develop and implement their in crime, citizens’ individual risk fell by stakeholders. security plans. The formal structure of the 42%, while property risk – by 34%. The SUSP will be established by the formation of general perception of public security Thus, national governments should focus permanent and deliberative councils to be increased among the citizens, the on drawing a broad-based unified strategy created with advisory capacity. positive image of the police force and and a roadmap for the creation of a safe city the government rose as well, which was ecosystem, which will enable the inter-city The establishment of the Ministry of the result not only of the investment in learning, improve knowledge sharing and Public Security serves as the basis for the equipment (surveillance cameras), but reduce the waste of resources related to the development of a unified strategy for safe also of the implementation of intelligent implementation of individual solutions. city solutions in Brazil. The SUSP could solutions. play the role of an entity dedicated to the development of secure urban solutions on
80 Insights about Digital Transformation and ICT Opportunities for Brazil
a larger scale that promotes cooperation standards policy for data. The fragmentation (iv) Standardization and integration between the three levels of and decentralization of many policy systems The applied digital solutions related to government. and the difficulty in sharing information safe city need to be standardized and with other public entities limits the accessible. It is crucial that the investment Moreover, the implementation of safe implementation of the safe cities concept in safe city solutions is made in a way that city solutions requires the collaboration around the country and result in lack of allows its easy evolution and adaptation between federal, state and local authorities, efficiency of the adopted solutions. to the continuously changing available as well as the participation of players from technological innovations, which can the private sector. Incentivizing cooperation across significantly lower the required investment. government divisions and geographical Currently, the major challenges for regions, as well as the involvement of the SENASP – National Secretariat of collaboration among different government private sector, is crucial for dealing with Public Security agencies and actors at different levels in these challenges. Building a committee for SENASP is one of the secretariats Brazil are the use of different technologies, managing safe city projects that includes of the Ministry of Public Security networks, platforms and devices, as well representatives of various agencies (MSP). The main objectives of as the lack of a reference architecture or across the city as well as stakeholders and this secretariat are the general experts on consultancy and technology coordination of public security policies development, as suggested above, is an and legislation at the national level Singapore case: Singapore is among interesting option for the government for and the development of research, the most innovative cities in the solving the problem with the collaboration technology studies and procedures world and is rather advanced in the between different stakeholders. to be applied in public security. In development and implementation of addition, SENASP is responsible for safe city solutions as part of the “Smart the national force - for coordinating Nation” plan. The adapted solutions National Council for Public Security its planning and operations; across the city are advanced, based on (CONASP – Conselho Nacional de coordination of the public security data analytics and machine learning. Segurança Pública) intelligence and counterintelligence Conasp is an advisory public entity system; coordination and planning of Significant efforts have been made without normative power for technical operations and activities of the national in transforming the Singapore Police cooperation between federal entities command center. Force into a crowdsourced entity. A in the fight against crime in Brazil. The Secretariat coordinates the CICCN – mobile app allows citizens to alert the The Council was created in 1989 Integrated Command and Control police on crime and violence through and operates under the Ministry of Center and conducts studies for the texts, pictures and videos. There are Public Security. The main objectives modernization of communications in Neighborhood Policy Posts (NPPs) that of Conasp are the formulation of the public security. provide self-service features and are National Policy on Public Security, fully automated, providing 24/7 access the stimulation of institutional to residents. The NPPs allow citizens to modernization for the development CNPCP – National Council of contact police officers through video of public security policies, the Criminal and Penitentiary Policy calls and make it easier for the police to elaboration of suggestions for CNPCP is the first of the criminal report crime and allows officers to be changes in legislation, the promotion enforcement agencies in Brazil redeployed from desk-bound duties. of the integration between federal, founded in 1980. Its functions include Moreover, there is a Programme state and municipal public security the establishment of national criminal Office that facilitates the collaboration agencies. Currently, the Council and penitentiary plans and policies, between public agencies and private follows the tripartite model composed the implementation of new policies corporations. of government representatives of the and the evaluation of the criminal, federal, state and municipal levels in criminological and penitentiary system. Singapore spends are about USD 4.1 addition to officials from the police The Council is composed of social billion on public safety, or USD 7.41 force, entities of workers in the area entities, researchers and professionals per resident, which makes it one of the of public security, and organizations in criminal law, community top countries in spending on public of the civil society related to public representatives and the DEPEN security. security. (National Penitentiary Department).
81 Insights about Digital Transformation and ICT Opportunities for Brazil
Currently, there are no comprehensive (v) Incentivize the use of open (vi) R egulate the use of private data as and largely accepted safe city technology platforms and open data a source of information for public standards. The creation of such standards, Safe city solutions require constant security however, can significantly facilitate the maintenance and long-term investment Another challenge for the implementation process of implementating safe city and usually involve the participation of of digital technology for the development solutions, can encourage interoperability and various vendors. This makes potential of safe cities is related to the privacy issues data sharing to increase the effectiveness of future updates costly and sometimes of the collected data. The government safe city applications and also can increase additionally complicated by vendors’ has taken important steps to ensure the the value proposition for such technologies. lock-in. The adoption of safe city solutions protection of citizens’ data through the using open platforms can build a solid and approval of the Law No. 13,709 in August It is also crucial for expanding cooperation replicable foundation for solutions to be 2018, known as the General Data Protection and exchange of information between cities, used in other cities. Act (LGPD). However, this law does not apply as well as other state and federal security to the processing of data carried out for agencies. Moreover, it can reduce development the purposes of public security, national time and costs, and can enable future defense, state security, or investigation and Moreover, the adoption of standards that innovation applications and updates. Thus, prosecution of criminal offenses. For the are an open platform could allow cities to it is economically viable to invest in an open development of safe cities, it is still necessary invest in technologies without worrying ecosystem that responds to a number of for authorities to develop specific regulations that there might be a problem in integrating standards previously established by the that allow a balance between keeping people them with the existing systems in use and government and allows for a continuous safe and protecting their private information. without taking the risk of technologies not interaction between the involved To do so, one must carefully consider the being compatible with future technologies. stakeholders – technology companies, nature of user privacy protection as well as citizens and government officials. Open the potential risks to cyber security attacks Technology providers must work together platforms enable the quick replacement of underlying the infrastructure required for in order to understand the goals of the the existing solutions and the addition of the adoption of safe city solutions. government in terms of safe cities as a new ones without the need of significant means of establishing standards for the adaptation on a large scale. A large portion of smart city technologies used technology and equipment. Even are built around the Internet of Things though the private sector should lead the In addition to the openness of the platform, (IoT) and data analytics and, as such, the development of standards, the government cities implementing solutions related implemented solutions will become more should lead the actions related to defining, to public safety should consider having valuable at scale due to the network effects. specifying and adopting standards for data open data, as well. This will improve If governments create regulatory barriers interoperability in different formats (texts, the sharing of information between the to these widespread deployments through videos) for public safety. involved stakeholders, thus increasing the limiting the public use of private data, the collaboration, which would facilitate the applications and services built around formulation of plans for crime prevention. data will be less effective. Smart systems Cities that adopt open data models rank that police departments could use to higher in public safety effectiveness rankings reduce crime, such as networks of gunshot than cities that do not share the collected detection sensors and predictive analytics, information. would be substantially less effective if they have strict limitations on sharing data among each other.
Thus, national governments should use their leverage to require system-wide data sharing safe city solutions for analytics purposes, when appropriate. In addition, authorities should stress that only a small portion of smart city data would be personally identifiable information to begin with and should work to dispel misinformed privacy fears as they arise.
82 Insights about Digital Transformation and ICT Opportunities for Brazil
Case
Campinas, founded on July 14th, 1774, is Campinas was one of the first cities development of intelligent city projects located in the interior of the state of São in Brazil to have a Monitoring Center, that allow the adoption of solutions Paulo, about 90 km from the capital São CIMCamp, established in 2006, which of companies of any size, including Paulo, with a population of 1.2 million monitors the city through cameras and startups. Another important aspect is the inhabitants. It is the third most populous intelligence systems. Currently, CIMCamp implementation of an open data policy and municipality in the state and the tenth has about 400 installed cameras the establishment of governance for the richest city in Brazil, being the third largest interconnecting municipal schools, health management of the plan. research and development center in the units, gas stations, and the road system. In country. addition, the Intelligent Vehicle Monitoring Moreover, in the process of digital System (SIMVECAMP) performs electronic transformation of Campinas, the Living The city of Campinas, known as the surveillance of cars and is able to inform, Lab concept is being incorporated, Silicon Valley of Brazil, is highlighted in the using a regional database, if the vehicle which represents an ecosystem of open national ICT scenario. Its digital ecosystem registered by the system is regular or innovation for the experimentation is composed of important actors belonging participated in a crime, for instance. of technological solutions that can be to the government, the academia and the incorporated in the day to day life of the private sector. Some 20 higher education Another highlight is the Campinas Digital citizens. institutions are part of this ecosystem, program, which aims to bring the citizens among which Unicamp and PUC Campinas, closer to the city authorities through digital A first example for this initiative of Living as well as around 20 research centers. services and the online systems of the Lab is the partnership between the Moreover, Campinas is the only city in the City Hall, as well as to provide free internet municipality of Campinas, The Center country with five technological parks. access for the population. In order to for Research and Development in conduct internal processes, the City Hall Telecommunications (CPqD) and the ICT One fast-growing sector is the Internet makes use of an integrated information company Huawei for the development of of Things (IOT), with the participation of system for the elimination of paper security solutions, vehicle monitoring and municipality institutions in the elaboration documents, which brings greater agility facial recognition, with the integration of of the National IOT Plan and the provision and is accessible through the website or smart cameras with cloud processing, to of an open IOT platform, which can through an App. the CIMCamp environment. The project contribute to the accelerated development intends to further develop applications for of solutions across industries such as the or the upcoming years, the Municipal civil defense and urban mobility. 4.0 industry and smart cities. Council of Science, Technology and Innovation (CMCTI), which is chaired by the In the area of Security and Civil Defense, Campinas has been working on its digital Municipal Department of Economic and there are cameras distributed throughout transformation process for several Social Development and Tourism the city and connected to CIMCamp, years and several services have been (SMDEST), prepared the Strategic Plan with images and data used for public made available to the population in the “Campinas Cidade Inteligente” (PECCI) safety. Today there are more than 400 form of digital media. It is possible, for with a duration of ten years. Like the cameras scattered throughout the city, as example, to consult information about Strategic Plan for Science, Technology and well as sensors installed for monitoring urban zoning and public transportation, Innovation (PECTI 2015-2025) prepared environmental disasters. In addition, the to obtain information on taxpayer’s in 2014, the PECCI is being developed mobile app “Guarda Amigo” is available financial statements, to receive certificates, with the broad participation from various to the citizens for sending an alert to a school report, and many others through sectors and stakeholders. This plan user-registered contact list in case of applications or through the City Hall foresees, among other concepts, the emergency. website. adoption of an open platform for the
83 Insights about Digital Transformation and ICT Opportunities for Brazil
Talent No digital revolution is enabled only with technology. A skilled digital talent is also an essential component to that
Insights and recommendations for talent
Talent
“Brazil – the talent hub of Latin America” Strategic
People qualification and Investment on skills related to Digital literacy requalification the ICT sector
Initiatives that enable supply and demand for talent: Operational
Supply Demand Stimulate cooperation with the private sector and education Improve financial and professional recognition of teacher and institutions professors Study groups to define the future jobs (from Economic and Promote events to stimulate STEM adhesion Social Development Council) Request from Multiple Sector Industry to include Digital Create and incentive research institutes Talent into ICT Emerging Technologies
Development case studies: Cases • Malaysian Education Blueprint
Source: Deloitte
84 Insights about Digital Transformation and ICT Opportunities for Brazil
The digital transformation comes with It is necessary to provide support to each Soft skills different group with the right skills sets a lot of challenges to many countries. It Global Interdisciplinary Entrepreneurial awareness and brings innovation to all sectors not just for and proficiency levels in order to deal Skills skills civic education the ICT Sector alone, but cutting across with the fast changing trends in the digital Creative and Technical Digital Manufacturing, Finance and Banking, Public transformation process. Leadership skills analytical skills Skill set sector and changes the way how people Hard skills interact with each other, conduct daily While the ICT sector stands out as the main activities and business dealings. The new driver of the new digital economy, it also Source: The Economist Intelligence Unit Limited, 2017 disruptive and emerging ICT technologies, plays an important role in the digital talent together with the slow adaptation rate, lead structure of the countries especially in The digital skills stand out as an important to widening of the digital skills gap between Brazil, demanding a new kind of professional set of abilities to the ICT sector and for the three different groups: digital leaders, with multidisciplinary skills. This kind of the development of qualified employees digital professionals and digital users. professional is being considered as key to especially in the emerging IT technologies the economic development of the country. that align with the Industry demands.
Many countries, in particular Brazil, The development of hard skills related to the Descriptions are putting substantial effort in the ICT sector is a challenge for many countries, development of their ICT sector aiming at especially for Brazil. A recent study done by Digital leaders: Group having an progressing in the digital transformation, Manpower Group, in the Talent Shortage influence on the organization of being able to create a pool of qualified digital Survey 2016, also highlighted that Brazilian ICT planning, policies, design, and talent groups with the right competencies employers face difficulties in obtaining implementation according to the ICT and skill set for the Brazilian economy. employees with hard skills on the digital Trend, industry demands, allocation market. of budget and resources. According to a recent study conducted by The Economist regarding the skills of the According to the Talent Shortage Survey Digital professionals: Group that future48, employees will need to master 2016, it is possible to identify that Brazilian provides direct development, not just ICT skills alone to balance them employees are still generally low skilled and support, integration & test into the with adaptable interpersonal, problem- require substantial support from the public backbone of ICT operation of the solving and critical-thinking skills in order to and private sectors to provide training organization and ensure quality and navigate through an increasingly digital and programs that gear towards the need of SOP are align with organization and automated world cutting across different the economy. Movements related to the client objectives. sectors in the economy. As a result, the development and improvement of the study indicates that employees need to existing workforce are necessary, Digital users: Group forming biggest specialize and qualify themselves in order creating people that pursue knowledge- pool that directly uses the ICT to get a spot in the local competitive labor intensive jobs. Platform Services, and their products. market. As future trends indicate, demand This group can influence trends and from employer expectations will be higher Regarding the industry and market necessity the market insight. especially in the ICT Sector. Neither only for knowledge intensive jobs, Brazil technical nor only business skills are performs below average in comparison to enough. The actual market demands other countries. This can be justified by the that employees mix both digtal skils and fact that Brazilian industries are not focused business and technical knowledge. in high aggregated value products and catching up in the digital transformation.
However, the Brazil public spending on education is higher than other countries.
41% of the employers attribute the difficulty to fill available positions across sectors in Brazil to the lack of hard skills.
85 Insights about Digital Transformation and ICT Opportunities for Brazil
Share of knowledge-intensive jobs in the workforce, 2016 (in %) 70
60
50
40
30
20
10
0 d n m LAC Italy Chile Israel Spain Brazil Japan China OECD France Turkey Poland Ireland Austria Greece Mexico Iceland Estonia Finland Canada Norway Sweden Belgium Slovenia Portugal Hungary Australia Germany Denmark Argentina Indonesia Korea, Rep. Switzerland South Africa Netherlands Luxembourg New Zealan United States Czech Republic Slovak Republic United Kingdo
Russian Federatio Source: World Economic Forum, Brazil Competitiveness and Inclusive Growth Lab Report. March 2018.
Public spending on education, % of total public spending 20
15
10
5
0 ISL ITA IRL ISR CRI FIN JPN LVA EST ESP BEL PRT LTU SVK LUX FRA CZE NZL AUS RUS AUT CHL TUR POL USA COL BRA SVN CHE KOR ARG NLD GBR DEU MEX CAN DNK SWE NOR HUN
Primary to post-secondary, non-tertiary Tertiary
Source: OECD, Public spending on education (indicator, 2014). doi: 10.1787/f99b45d0-en (Accessed on May 2018).
86 Insights about Digital Transformation and ICT Opportunities for Brazil
Public spending on education in Brazil is Brazilian companies need to invest in the require skills combination. This has led high in comparison to other countries. competencies and the proficiency levels to companies looking for alternatives to For the tertiary level (universities) the of their employees in order improve outsources management of their network. investment represented 3.5% of the total productivity and growth levels. public spending on education, while for A recent IDC study suggests that Brazilian primary and pos-secondary non tertiary The Brazilian economy continues to grow companies have to emphasize that their reached 12.7%. The behavior of the public across different sectors increasing the digital talent with network domain has to spending raises a concern related to the demand for ICT skills in particular for understand how technologies affect and management and distribution of the networking digital talent. These skill gaps enable the businesses, giving importance to spending, once the knowledge intensive are happening as a result of the increasing cross technology skill sets. workforce is not more than 20% of the jobs. demand of services in many segments especially by mid-size corporation. Large Considering the information presented in Considering the percentage of public data center service companies which had the chart below of the full time equivalent spending on education and the knowledge previously set up their operations in Brazil (FTE) – which is a figure that represents intensive jobs, it is possible to observe that continue to do well, and this has created the employee spending 100% of their Brazil has been spending inefficiently. additional demand for digital talent, thus time in Networking – the forecast for 2019 widening skills gap, and increasing the puts Brazil as the country with the biggest Given that the ICT sector demands qualified costs to hire other digital talent from the networking skills gap in terms of employees, employees and the knowledge-intensive neighboring countries. The study also among other countries from Latin America. jobs are below the world average, the found that 75% of the Brazilian companies ICT skills gaps in Brazil are getting bigger. face difficulties to recruit digital talent that
Total FTE Gap in Latin America – 2019 Forecasts
161,58
148,05
56,53
25,20 23,17 17,15 12,77 9,20 6,64 5,30 3,57 Peru Chile Brazil Mexico Ecuador Argentina Colombia Colombia Venezuela Costa Rica Others Latam
Source: Networking Skills in Latin America, IDC 2016. Dominican Republic
87 Insights about Digital Transformation and ICT Opportunities for Brazil
This is not surprising considering that Brazil Latin America is expected to face a gap and skills of cybersecurity, (having greater has the largest ICT market in Latin America, related to professionals, especially with risks in the network due to connection of which is expected to grow 2.2% in 2018, data center & virtualization skills. For the mobile devices) and software application according to IDC, driven by the IT sector, development of IT environment within the development. which is expected to grow 5.8%. In terms small medium enterprises, the majority of IT investment, Brazil ranked first in the of the organizations in the region are According to IDC, cloud services, data Latin American region in 2017, with US$38 involved in the transformation of their centers, mobility, Big Data and Analytics billion in technology, followed by Mexico server virtualization and data centers. The will be the segments that will register the with US$20.6 billion and Argentina with virtualization trends will continue to play a highest growth rates in the coming years in US$8.4 billion (IDC). The projections for the significant role especially in the preparation Latin America. Thus, the top professionals coming years remain positive despite the of cloud ready environment, thus presenting demanded in the job market are related to difficulties faced by the ICT sector in the a challenge into the complexity of the the ICT sector and include cloud experts, country, driving digital transformation. This organization infrastructure in terms of information security, software engineers, trend significantly impacts the domestic reliability, cost reduction, and security. business analysts, Chief Technology Officer labor market, leading to increased demand (CTO) and PMO (Project Manager). for IT professionals with digital skills, Mobile technologies require digital talent thus requiring investment in training and with skills in managing wireless technologies. education. On the other hand, network applications will generally demand more digital talent
Industry Government University
Skills Gaps per Technology
136,277
Sharing Experience Initiate & Facilitate Supply of K-Workers
Anchoring Adopting
Vendor Academy Vendor Academy Vendor Academy Aprenticeship Aprenticeship Aprenticeship Train the Trainer Train the Trainer Career of Choice Seminar/Workshop Seminar/Workshop 46,955
25,946 22,953
3,338 7,053 386 3,235 IoT Cloud Mobility Big DataBig Cyber security Cyber SW Development SW Video Technologies Data Center & Virtualization & Center Data Source: IDC, 2016.
88 Insights about Digital Transformation and ICT Opportunities for Brazil
The Latin American job market, however, INATEL and SENAI, in partnership with To achieve the objectives of the IAC lacks digital talents qualified to meet companies, could act to provide preparatory program, there are some initiatives that the growing demand for these types of courses for recognized professional must be followed. These are: specialists. IDC has estimated that the skills certifications and aligned with the main a. Train-the-trainer (TTT) programs at gap for video technologies will reach 61% in practices of the ICT sector. collaborating institutions of higher 2019, 53% for data center and virtualization, education; 24% for Big Data and 21% for cloud (i) Industry Academia Collaboration b. Collaboration to embed industry-relevant technology. The largest gap will be observed (IAC) modules into the present curriculum; for mobility, rising from 46% in 2015 to 62% To promote the convergence and synergies c. Collaboration on providing final year in 2019, with 46,955 missing FTEs in the between government, companies and students with industry projects labor market in Latin America. education institutions it is possible to d. Involvement of industry subject matter use the model of Industry-Academia experts as guest lecturers to run industry Another challenge is related to improving Collaboration (IAC). The main benefits of this relevant modules and mentor the the workforce digital talent groups in order model are: students to provide the market professionals with A. Industry-relevant graduates are produced e. Incorporation of key industry modules into the necessary skills to fulfill the existent and and aligned to the ICT Industry; the academic curriculum forecasted gaps. To address these skills gaps B. Structured practical attachment for f. Industry exposure via experimental there exist some approaches that stand undergraduates through mentored learning programmes out as possible ways to improve the digital real ‑life projects by the industry; •• Industry supported/lead competitions talents in Brazil. C. Enhancement of skills of faculty members •• Technology conferences in the delivery of industry-relevant ICT •• Workshops Companies may also receive incentives curriculum; •• Industry exposure series to provide training in information and D. Development of soft skills such as critical •• Customized internship programmes communication technology solutions. Thus, Problem Solving & Entrepreneurship courses related to the structure and design skills. In this way, using the IAC it is possible to of data networks and telephony could be identify the synergies between supply taught with the objective of encouraging the and demand. The industry drives the qualification of professionals to work in the development and the specialization of the technology market. workforce according to its demands, while the Academia response is direct, generating value for the country.
Therefore, by facilitating this partnership, tech companies and professional associations could provide courses, Setting the standards for effective industry academia collaboration internships, scholarships, accreditations in order to train the workforce for the digital Optimized ecosystem. To ensure education remains (Joint R&D Efforts) Joint collaboration to job-relevant, it is crucial to collect insights create new knowledge 5 from government, academia, businesses, Managed and society in the curriculum design Performance feedback for (Feedback Loop) effective collaborations 4 process. This collaborative initiative has to emphasize entrepreneurship as part of Defined Continuous and deeper (Joint-Lectures) the curriculum to bring innovation to the sharing of knowledge 3 market. Repeated Knowledge shared and (Embed Curriculum) embedded in curriculum 2 Ad-Hoc Programme based, (Short courses) ad-hoc collaboration 1 Industry and IHL (International humanitarian law) needs to collaborate to progress through the maturity model
89 Insights about Digital Transformation and ICT Opportunities for Brazil
The IAC Engagement Model
Members Core tasks
Minister / Captains of All recommended guidelines, frameworks, policies, Core Comitee Decision industry reports and other documents drafted must be reviewed and approved Core Committee before Quarterly meeting being implemented
Steering/ Consultative Comitee Review / Recommendation Ministry of Education Members from industry. IHLs and relevant officials, vice chancellors, government agencies to provide strategic advice Monthly meeting revision chairperson and help ensure that policies and initiatives that have been mapped out are aligned to the need of Appointed/Working Comitee Proposal / Action Plan the industry Monthly meeting Industry Industry Industry MOHE/MOE, IHL, The activities of the appointed committees will be industry representatives guided, supervised and coordinated by Steering / Consultative Committee Special Interest Group Members from the industry, IHLs and relevant government agencies to come out with strategic Group Chairperson Curriculum Changes proposal in-line with the needs of the industry Focus activities Vendor Academy Aims of the measure Industry programs • To ensure that there is a consensus between Apprenticeship committee members aims & objective • To identify the contribution undertaken by Training Programmes members • To compare de actual with planned performance.
(ii) S ENAI: Education, companies and 504 mobile units. Moreover, it has 8 In addition to professional education, industry together49 professional training centers abroad, as well SENAI also supports the competitiveness The National Service for Industrial as an environmental technology center. of the Brazilian industry, through the Apprenticeship (Serviço Nacional de network of SENAI Institutes of Innovation Aprendizagem Industrial, SENAI) is an On education, SENAI develops professional and Technology. With infrastructure and example of investment in education applied training programs, meeting the demands trained professionals, the network develops to the industry capacitation needs. It of the Brazilian industrial workforce innovative products and processes. By functions on the Brazilian territory and it is considering the specificities of each region 2017, industry service expanded with the legally constituted as an institution of private of the country. It acts on the three levels of creation of 26 innovation institutes and 61 character managed by representative vocational education – basics, technical and technology institutes. entities from the industry and supervised by technological. Its courses prepare young Federal authorities. SENAI is maintained by people for their first job and provide further Contributing to the Brazilian industry, social contribution from industrial and agro education for professionals who are already SENAI has created the SENAI Institutes of industrial companies, which collect 1% of the on the labor market. Related to professional Innovation (ISI) that will act on large, medium total payroll of their employees. qualification, SENAI has formed more than and small companies. In large companies 64.7 million workers since 1942. they will facilitate research and development This organization plays an important role in projects and in medium and small developing education applied to industry, In 2015, SENAI did some actions to companies they will stimulate innovation in training and offering technical services education quality as curriculum update, initiatives and the formation of technology and technological support, disseminating curriculum actualization, adoption of new parks. The initiative has partnerships with productive and organizational technologies. education technologies, continuing teacher the Fraunhofer Institute in Germany and the SENAI is present in 2,7 thousands cities training and improving school management. Massachusetts Institute of Technology (MIT) in Brazil with 109 thousand technical In that year, SENAI had more than 3.4 million in the United States. and laboratory services performed and enrollments in courses of initial and continuing training, mid-level technical and higher education courses. Moreover, SENAI offers some classroom and distance ICT courses related to telecommunication and information technology.
90 Insights about Digital Transformation and ICT Opportunities for Brazil
Recommendations information. Greater network connectivity Inserting business in the education and construction of teaching platforms with system brings the dynamics of the digital basic content can generate several benefits transformation to highlight the capabilities for populations in peripheral areas. required by the market. Also with regard to the development of Innovations are key for the digital world, thus digital talent, women have been gaining their Brazil should have mechanisms to stimulate space and are increasingly present in the and protect the intellectual propriety as well ICT sector contributing in all aspects, both as the changes it imposes. The IAC model, technical and management. It is essential the financial and professional recognition that gender equality initiatives for all sectors, of teachers and professors, as well as local including ICT, to be considered and put into innovation and patent process innovations practice. are important factors that must be taken into consideration in the development of the According to the GSMA, presented in the ICT Digital talent strategy for the digital era. Panel Telebrasil 2018, when comparing the possession of a smartphone between Distance learning (EAD) has been an men and women the research indicates alternative for Brazilian qualification. In that a woman is 15% less likely to have recent years, there has been a significant a smartphone in Brazil. To change increase in the number of universities that numbers initiatives such as the that offer undergraduate, postgraduate “International Day of Girls in ICTs”, which and specialization courses on online seeks to engage girls to develop their channels. This increase shows the trend careers in the sector, are essential and of change in the behavior of the Brazilian should continue to be realized. population. People are increasingly Regarding the Brazilian scenario, the seeking specializations given the high professional of the future must be idealized. competitiveness of the labor market. Talent becomes a cross-element that However, companies and industries still find involves the development of infrastructure it difficult to find qualified workers with the and the deployment of new applications. required level of knowledge. Investing in education, skills, and trainings The ICT sector has favored and has the results in new perspectives for innovation, potential to continue fostering distance key element for responding to the dynamics education in Brazil, once through mobile of the market. The professionals of the devices people can have access to digital era learn how to learn and, as they various types of content and sources of incorporate new skills, the boarders of competitiveness expand.
91 Insights about Digital Transformation and ICT Opportunities for Brazil
Brazilian Government initiatives and improvements
As part of Brazil’s concern to address the education matter, the government has already included in its agenda education reforms, for instance the Economic and Social Development Council (“Conselho de Desenvolvimento Econômico e Social” - CDES) and the National Common Curricular Base (“Base Nacional Comum Curricular”, BNCC) 50.
National Policy for Teacher Training: Although some recommendations have already been addressed, new policies ought Implement a national policy for initial and continuous training for teachers to improve teaching environment in line and managers, focusing on practice, valuing motivational aspects, with the digital era. Innovation has to be interpersonal skills and leadership, articulated to careers through national incorporated in the classroom supporting certification and establishment of promotion on meritocratic bases. the Brazilian future workforce to be part of Innovation-Education Connected Policy (“Política de Inovação Educação the innovation of the digital environment. Conectada”): Launched on 2017, it has the objective to universalize access to high-speed Internet in schools, complemented by the development Among CDES taskforce recommendations, of a digital culture, which includes: skills, content, tools and platforms, some topics have to be addressed to with the goal of training the citizen of the 21st century. Partnership improve employment rates in Brazil. Basic EducationBasic between Ministry of Education (MEC) and Ministry of Science, Technology, In order to prepare students for the Innovations and Communication (MCTIC). new economic scenario, educators Intersectorial Committee on Public Policies for Early Childhood: must be continuously updated about Coordinate, through an interministerial instance, the execution and new techniques, technologies, and monitoring of the Legal Framework for Early Childhood (Law 13,257 / methodologies to guide students to prepare 2016), encouraging the implementation of a pact between Federal, State themselves for the digital environment. and Municipal Governments, that will enable its effective action. Include in the composition and commissions of the National Education To complement digital talent development, Council (CNE) representatives of the business sector indicated by their the collaboration between the public and
representative entities, in order to adapt the training to the needs of the private forces should be considered to bring labor market, stimulating the same practice in the State and Municipal innovation to the educational system. CDES Councils of Education EECs and CMEs). taskforce suggests the participation of the Promote regional development, based on local vocations, acting in an private sector to define market needs. The integrated and subsidiary way to the municipal and state responsible, in private sector could bring the dynamics of CDES: Recommendations of the Working Groups of the Council the of Groups Working the of Recommendations CDES: order to boost the local economy and generate quality jobs, supporting market innovation to assist trainings and
21st century 21st the technological improvement of the workforce to meet the demand. skills requirements. The Brazilian Academy of Science (“Academia Brasileira de Ciência”, Prioritize basic education through efficient budget allocation and ABC) also highlights the importance of
Employability in Brazil of the of Employability Brazil in management, establishing quality indicators, with the objective of initiatives combining academy and business, eradicating illiteracy and equating Brazil’s performance with the best as mentioned in “Projeto de Ciência para o educational systems in the world. Brasil” (Project of Science for Brazil)52.
Collaboration between the public and private sector should be considered to bring innovation to the educational system. In the US, 20% of innovations were collaborations between public-private partnerships, between private companies and universities or government research labs51.
92 Insights about Digital Transformation and ICT Opportunities for Brazil
What the Future Jobs Demand Imputs from Industry & Government Sectors
CP4 HARD SKILLS (Discipline Specific)
CP3 Digital Fluency STEM 1.0 + = STEM 2.0 CP2 Innovation Exellence In the United States, part of the education system is aligned with the private sector. CP1 Emplayability Skills 2.0 A national platform, regulated by the labor department, brings together education and private sector to engage students to What Education Needs to Provide be aligned with the market needs. The Inputs from Education Sector & Fundational Research US put in place a system that develops human capital equipped with knowledge “Educational Alignament” Horizontal Plattform Support and expertise in the fields of Science, Technology, Engineering and Mathematics Source: STEM2.0: An Imperative for Our Future Workforce. A Publication by STEM connector’s Innovation 53 (STEM). It was improved to STEM 2.0 to Task Force. June, 201454. define and find solutions for future critical career capabilities, beyond a STEM 1.0 education, that is believed to be the base of the workforce preparation to the market. Malaysia Education Blueprint 2015-2025 According to the STEM 2.0, there are four capability platforms to the educational In 2013, the Malaysian Ministry of Strategies and initiatives of the 10 Shifts ecosystem. These capabilities are: Education began developing the were distributed in a roadmaps across •• Employability Skills: Behaviors beyond Malaysia Education Blueprint 2015–2025 three waves. technical skills. (Higher Education) or the MEB (HE). •• Innovation Excellence: Requires a shift This document offers a vision of the The first wave focused on establishing the from focusing on solving complex education system and students that building blocks for the transformation; technical problems to defining and Malaysia needs, suggesting strategic and the second wave introduced more redefining the right problem before operational shifts to achieve the national structural improvements to accelerate solving it and doing this in the context of education goal. the pace of change; and finally, the the market and business environment of third wave strengthened the global the future. The objectives of the program were: prominence of Malaysia’s higher •• Digital Fluency: Application of STEM understand the current situation education system. learnings to specific “real world” problems (performance and challenges); stablish through digital technology. a clear vision and aspirations (access, The MEB highlighted the effort of the •• Hard Skills: Industry-specific skills that quality, equity, unit and efficiency); and Malaysian government in order to should be mastered by students to excel outline a program for the education improve and transform its education, in new careers in industries system. creating a specialized workforce that will be capable to join the labor market with In Brazil, according to the OECD, the To achieve these system and student relevant skills to the development of the youth has low performance in reading, aspirations, the MEB (HE) outlines 10 ICT Sector. mathematics and science when compared Shifts that address key performance to others countries. This result reinforces issues in the system, particularly with Source: Malaysian Education Blueprint the need for improvement in education regard to quality and efficiency, as well 2015-2025 (Higher Education). Ministry related to basic knowledge, as well as the as global trends that are disrupting the of Education Malaysia, 2015. Available development of other skills that are still not higher education landscape in: http://www.padu.edu.my/about-the- included in the curriculum, but are essential blueprint/history-of-meb/ for the jobs of the future.
93 Insights about Digital Transformation and ICT Opportunities for Brazil
“One of the greatest educational challenges for the digital era is the reskilling of current workers, so that they can successfully switch to new professions that arise. Finding out appropriate training curriculum and delivering it, is mandatory to building a solid workforce.”
Osvaldo Lahoz Maia SENAI
94 Insights about Digital Transformation and ICT Opportunities for Brazil
6. Final remarks
This study assessed the relevant challenges fiber deployment, right of way facilitation, The ICT sector is the catalyst of further to build up the ICT foundations for the promotion of synergy of infrastructure development of other sectors of the Brazil. The main points addressed relate between the distribution of public economy. The environment generated by to bottlenecks in the deployment of services and the optical fiber network, and the Digital Ecosystem creates opportunities infrastructure, development of services improvement of the FUST management. for innovation and new business models applications, and trainings of digital talents. that may make the economy more dynamic Another important aspect to the success of to respond to changes. Information and To address such challenges, this report the country’s digital transformation is the communication technologies ought to proposes an assessment of 5G-ready, migration to the cloud environment. There is be exploited as an asset for competitive optical fiber, and cloud computing as a need to stimulate the expansion of public advantage that allows the optimization infrastructure enablers for the country services provided through the cloud, to of processes, the interconnection of development. Moreover, it highlights the attract data centers to the national territory, unexplored organization’s silos, and the concept of safe city as an application to be elaborate regulations on data privacy and generation of a new system that integrates conceived once the basic elements of the create a legal environment favorable to people, businesses, and things, shifting ICT infrastructure are deployed. Finally, cloud services through fiscal incentives. from the concept of traditional value chain it reinforces the importance of the right In terms of enforcement, the government economic perspective. training of workforce with skillsets that needs to encourage the adoption of safe city can support the development the Digital solutions across the country, which would Brazil has already changed its agenda to Ecosystem in Brazil. help reduce the crime rate and violence in address some of the key elements for ICT large cities. To this end, the government’s development, and can make a strong move For each of these five pillars, Deloitte focus should be on investment in intelligent to become a major player and positive identified the barriers to its development solutions based on facial recognition, influencer for Latin America. However, and suggested specific actions for the artificial intelligence and big data, as well as this depends on the specific actions of government to overcome the existing the creation of technology standards and a the government and requires discipline in challenges. With regard to infrastructure unified strategy between the three spheres the execution, as well as coordination and facilitators, the Brazilian government of government that allows integration and cooperation between all parties involved: needs to ensure the successful transition collaboration of public and private actors. public, private and academic sectors. to 5G technology by 2022 through the promotion of synergy of basic infrastructure The successful future development of the (3G, 4G and 4.5G), optimization of ICT sector cannot be achieved without spectrum standards, debureaucratization professionals with a multidisciplinary of the installation process of antennas, set of skills appropriate for the digital development of fiscal incentives and age. Promoting collaboration between habilitation of a new ecosystem of IT and government, the private sector and telecommunications. educational institutions, aligning the educational curriculum with the demands In addition, to increase connectivity and of the ICT sector, stimulating research improve optical fiber coverage across the and creating incentives for the creation of country, the government needs to consider patents are crucial aspects for improving the adopting the dig-once policy that requires workforce and reducing the existing skills gap. construction project planning for optical
95 Insights about Digital Transformation and ICT Opportunities for Brazil
Appendix
Methodology This study about Digital and ICT Opportunities for Brazil begun with the assessment of the potential of the digital transformation in Brazil and with the analysis of previous studies and projects already conducted by the government (for example, e-Digital). The objective of this report aims at designing a tactical approach to the main barriers for Brazilian ICT development, identified during the phase of assessment.
To better comprehend the variables associated, the project was subdivided into subset components of the digital ecosystem, which were related to infrastructure investments, policies and regulations, skills and trainings. The analysis of each initiative was conditioned to the discussion of strategical, operational, and tactical level, approaching supply, demand and governance dimensions. Additionally, selected benchmark cases were cited to strengthen the thesis.
The project team conducted interviews, workshops and panels to enrich the discussion over the topic. As the team transited within different sectors and was exposed to different segments of society, they collected contrasted point of views, which enriched the discussion and maintained Deloitte’s neutrality and independency over the topic.
The discussions among public, private, and academic sectors were marked by the proactive participation of all entities, facilitating an exchange of knowledge on the respective subject matter. As a result, the Deloitte’s group assessed government initiatives in place related to the digital economy, envisioning a coherent a tactical approach.
All interviews as well as the report elaboration and writing were conducted, build and concluded in 08 weeks. These interactions intended to identify the most relevant topics for the digital transformation strategy for Brazil, as well as the identification of priority strategic actions. Thus, some topics justified more attention, such as 5G ready, broadband, cloud computing, safe city, and talent.
With the collaboration of all stakeholders, the report was settled and consolidated to enrich Brazilian agenda over the digital transformation, proposing an active regard to address the innovations yet to come.
96 Insights about Digital Transformation and ICT Opportunities for Brazil
Notes
1. The OECD definition establishes the criteria for 11. http://www.teleco.com.br/precos_pais.asp 28. Digital Cities Program, available at www.brasil. manufacturing for the companies that intend 12. Global Mobile Consumer Survey – GMCS gov.br to fulfill the function of information processing 13. Brazilian Strategy for Digital Transformation, 29. Brazilian National Broadband Plan, available at and communication including transmission and e-Digital http://www.anatel.gov.br and http://www.brasil. display; using electronic processing to detect, 14. A robust Right of Way (RoW) rules, uniformly gov.br/ measure and/or record physical phenomena applicable across the country, simplify and 30. Broadband in Brazil: a multidisciplinary public or control a physical process. Services are streamline the process of RoW approvals. With sector approach to digital inclusion, Information considered as those activities that enable regard of laying optical fiber cables, the process of for Development Program – The International the function of information processing and licensing shall become easier. Bank for Reconstruction and Development, The communication by electronic means. For 15. The GCI’s S-curve shows 50 nations’ progress in World Bank. further details, see OECD “Annex 1 – The OECD digital transformation, grouping them into three 31. 2010 Population Census represents the last data Definition of the ICT Sector” from Measuring The clusters based on their GCI scores: starters, collection conducted by IBGE. Information Economy (2002). adopters, and frontrunners. Further details of the 32. Resolution 527 (2009), Regulation for the use of 2. The compound annual growth rate (CAGR) CGI can be found in Chapter 2 of this report. Power Line Communications (PLC) Technologies. measures the average annual growth over a 16. The Matthew effect of accumulated advantage 33. ESB is Irelantd’s energy company, comprising specific period of time, calculated as the division can be briefly summarized as “the rich get richer power generation, networks, and supply of of the value at the end of the period by its value at and the poor get poorer”. electricity. the beginning of the period, raised to the power 17. Connecting America: The National Broadband 34. Vodafone Group is a telecommunications of one divided by the number of periods. Plan, chapter 6 - Infrastructure provider with a wide range of services operations, 3. The list of LDCs is defined by the UN based on 18. Executive order: Accelerating broadband including voice, messaging, data, and fixed three criteria: per capita income, human assets infrastructure deployment, United States communications. and economic vulnerability. Currently, there are Department of Transportation, Federal Highway 35. https://siro.ie/what-is-siro/ 47 countries listed as LDCs. (http://unctad.org/en/ Administration, Office of Policy and Governmental 36. https://siro.ie/more-about-siro/ pages/aldc/Least%20Developed%20Countries/ Affairs – Successful practices of broadband 37. OECD (2006), “Rethinking Universal Service for a UN-list-of-Least-Developed-Countries.aspx) deployment in highway rights of way: Summary Next Generation Network Environment”, OECD 4. The Global Connectivity Index classifies countries paper (2013) Digital Economy Papers, No. 113, OECD Publishing as starters, adopters and frontrunners. 19. Connectivity Plan, San Francisco Department of 38. https://www.oecd-ilibrary.org/ 5. A deeper analysis regarding the variables time Technology, City & Council of San Francisco. docserver/5jxzf4lcc7f5-en.pdf?expires series could statistically prove the co-integrated 20. The data utilized in this example was extracted =1526321041&id =id&accname=guest&checksum behavior of both series. from the U.S. Department of Transportation, =54CA5930D77E122608F6 BC66C9171813 6. Teleco is a website that consolidates news, Offices of Assistant Secretary for Research and 39. Data from March 14 of 2018, presented on 3rd databases and analysis related to the Brazilian Technology, regarding the U.S. states of Florida. Brasscom Seminar on Public Policy & Business. telecommunicationss sector. It is composed by 21. Values may vary if fiber optic is also deployed with 40. https://cloudscene.com/datacenters-in-south- telecommunicationss’ professionals that also act the conduit infrastructure. america as consultants. 22. OECD (2006), “Rethinking Universal Service for a 41. Gartner IT Infrastructure, Operations 7. The fixed assets are basically machinery, Next Generation Network Environment”, OECD Management and Data Center 2018 equipment and construction material. In Digital Economy Papers, No. 113, OECD Publishing Portuguese “Formação Bruta de Capital Fixo” is 42. For more information: http://govdata.gov.br/ 23. Directive 2002/22/EC of the European Parliament estimated quarterly by IPEA (Applied Economy 43. This annual study was initiated in 2012 and the Council (March 2002), annex V Research Institute). examines the legal and regulatory framework 24. US Telecommunicationss Act of 1996, “to promote 8. For more details related to the National Plan of of 24 countries around the world, identifying competition and reduce regulation in order to IoT please check the BNDES website, where is 72 questions, divided by six main topics - data secure lower prices and higher quality services possible to find all deliverables of the project. privacy, security, cybercrime, intellectual property for American telecommunicationss consumers Link: https://www.bndes.gov.br/wps/portal/site/ rights, standards and international harmonization and encourage the rapid deployment of new home/conhecimento/pesquisaedados/estudos/ and promoting free trade, which are relevant for telecommunicationss technologies.” estudo-Internet-das-coisas-iot determining readiness for cloud computing. More 25. Decree 6424 (2008) - PGMU detail in: http://cloudscorecard.bsa.org/2018/pdf/ 9. https://www.gsma.com/futurenetworks/ 26. Broadband at School Program, MEC, available BSA_2018_Global_Cloud_Scorecard.pdf wp-content/uploads/2015/01/Understanding- at http://portal.mec.gov.br and http://www. 5G-Perspectives-on-future-technological- 44. https://dkf1ato8y5dsg.cloudfront.net/ brazilgovnews.gov.br advancements-in-mobile.pdf uploads/5/82/safe-cities-index-eng-web.pdf 27. Digital Government, available at: https://www. 10. State tax on the circulation of goods and services governodigital.gov.br in Brazil
97 Insights about Digital Transformation and ICT Opportunities for Brazil
45. http://www.connectedsmartcities.com.br/ 50. Minister of Education site, accessed on May, 2018. resultados-do-ranking-connected-smart- http://portal.mec.gov.br/index.php?option=com_ cities/?lang=en docman&view=download&alias=85121-bncc- 46. https://cdn.ihs.com/www/Technology/Security/ ensino-medio&category_slug=abril-2018- IHS_Markit-Benefits_of_Safe_Cities_WhitePaper. pdf&Itemid=30192 pdf 51. ITIF (https://itif.org/publications/2016/02/24/ 47. https://noticias.uol.com.br/cotidiano/ultimas- demographics-innovation-united-states) noticias/2018/02/21/sob-intervencao-rio-e- 52. http://www.abc.org.br/IMG/pdf/projeto_de_ o-estado-brasileiro-que-menos-investe-em- ciencia_para_o_brasil.pdf inteligencia.htm 53. STEM2.0: An Imperative For Our Future 48. Worldwide Educating For The Future Index: A Workforce. A Publication by STEM connector’s benchmark for the skills of tomorrow. EIU Yidan Innovation Task Force, 2014. Prize Education. The Economist Intelligence Unit 54. https://www.stemconnector.com/wp-content/ Limited, 2017. uploads/2016/12/STEM-2pt0-Publication-2nd- 49. Sources: http://www.portaldaindustria.com. Edition-1.pdf br/senai/institucional/atuacao/, accessed on May, 2018. Institution Profile, Edition. 2016. Relatório de Sustentabilidade 2015. http://www. portaldaindustria.com.br/cni/canais/relatorio- sustentabilidade/educacao/, acessed on May 2018.
98 Insights about Digital Transformation and ICT Opportunities for Brazil
Authors
Marcia Ogawa Matsubayashi Partner, leader of Technology, Media and Telecommunications in Brazil Deloitte Brazil
Roberto Takao Oikawa Senior Manager, Analytics & Information Management Deloitte Brazil
Victor Lucas Pedroso Alves Senior Consultant, Analytics & Information Management Deloitte Brazil
Nataliya Dimitrova Popova Consultant, Analytics & Information Management Deloitte Brazil
Gabriel Bustamante Ferrada Silva Consultant, Analytics & Information Management Deloitte Brazil
Support
Dario Mamone Partner of the Consulting area at Deloitte and leads the Technology practice in Brazil Deloitte Brazil
Jefferson Lopes Denti Partner of the Consulting area at Deloitte and leads the Analytics & Information Management practice in Brazil Deloitte Brazil
Renato Souza Director, Brand & Communications Deloitte Brazil
Marta Daré Communications Specialist, Brand & Communications Deloitte Brazil
Guilherme Salviati Supervisor, Brand & Communication Deloitte Brazil
Ariadne Bitencourt Ferreira Domene Schneider Consultora, Analytics & Information Management Deloitte Brasil
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