Data-Driven Development

The rise of the internet has altered communications network value chains. In the past, little value was perceived in the content of traffic carried over communications networks. In the telecommunication world, this traffic was mainly telephone calls. While some of the calls may have triggered wealth, the direct income accrued to telecommunication carriers that transmitted the calls and billed them. In the case of broadcast and private networks, content was more financially significant but intra-industry (such as broadcast transmissions to satellite and cable television companies, banking transactions).

The development of the internet in the 1960s, the World Wide Web in the 1990s, and its iteration in Web 2.0 more recently has modified the way content is obtained and created.

Traditional content providers such as the media and audiovisual companies have moved online either with their own websites or by licensing content to streaming platforms. Take the BBC, which has 98 million global internet users viewing 1.5 billion pages a month. Or O Globo, one of Brazil's largest newspapers, whose online readers (23 million) outnumber print readers (300,000) by 75 times. A big difference is that not only can anyone access content anywhere on the public internet, they can also create it. Users become creators by sharing their own content with others through blogs, videos, social networking posts, and product and service reviews. Attention has shifted from the carrier of the data to the creator; from "the medium is the message" to the messages delivered over the medium. A company's telephone number is arguably no longer as important as its website, and individuals increasingly exchange their email or social networking links. Similarly, in video entertainment, power is shifting from the company broadcasting the content to the creator. This is reflected in the rise of companies offering internet-delivered video such as Amazon and Netflix and television content creators now embracing the internet (HBO NOW streaming service).

Many of the world's top websites (ranked by a combination of users and page views) are platforms for usergenerated content such as social network posts, video sharing, blogs, and collaboration (for example, Wikipedia) (table 2.1). All of the top sites are headquartered in either the United States or China, the two countries with the most internet users (more than 900 million combined, or just over a quarter of all internet users). While the US sites are mostly global, Chinese ones are mainly local. The concentration of so much data on so few sites is concerning, particularly as the giant internet companies behind most of them branch into other domains. Many aspire to be the single window to communications, news, and shopping.

Table 2.1 top 10 global websites

	Site	Description	Daily time on  site (minutes: seconds)	Daily page views per visitor	Percent of traffic from search	Total sites linking in	Users (millions), 2016
1	Google	Internet portal	8:45	8.63	2.3	3,011,003	~1,000
2	YouTube	Video sharing	9:23	5.40	8.6	2,347,245	~1,000
3	Facebook	Social network	13:56	5.32	4.4	7,278,321	1,860
4	Baidu	Search engine	7:43	6.68	4.5	118,000	657 (2015)
5	Wikipedia	Encyclopedia	4:26	3.31	36.9	1,287,362	374 (2015)
6	Yahoo	Internet portal	4:28	3.90	5.3	529,800	650a
7	Qq	Instant messaging	5:05	4.52	3.7	211,248	877
8	Taobao	E-commerce	8:33	4.48	3.8	48,973	407 (2015)b
9	Reddit	News links	13:31	9.28	12.3	416,267	234
10	Tmall	E-commerce	5:51	3.45	1.0	8,642	407 (2015)b

Data centers: Greener and further away, or closer to home?

The growth of internet content is driving the need for places to store it. A data center is a location with networked computers providing remote storage, processing, and distribution of data. They are mainly operated by global IT companies, governments, and enterprises that host other companies' data (that is, colocation). Data centers vary in size, capability, security, and redundancy. A so-called tier 1 data center provides basic nonredundant connections between computer equipment and may be prone to electrical outages, and a tier 4 center has redundant components, multiple connections between computers, continues to operate during maintenance, and is protected against most physical events.

Statistics vary widely about the number of data centers in the world. One challenge is that most centers are "small racks in computer rooms in smaller companies". Although the number of data centers has grown rapidly, growth is forecast to slow because of the trend toward larger spaces. More information is available about giant data centers, referred to as "hyperscale" because of their size and ability to add servers and storage as needed. They are operated by about two dozen global IT companies, including heavyweights such as Amazon, Microsoft, and IBM, as well as enterprises providing cloud-computing services. The 259 hyperscale data centers in 2015 are projected to grow to 485 by 2020 (figure 2.3).

Figure 2.3 Hyperscale data centers

Although the majority of hyperscale data centers are in developed nations, data center growth in emerging markets has ticked up. As more users are connected to the internet in lower-income nations, demand for data is rising. IP traffic is forecast to grow fastest in developing regions during 2015–20. Some countries are concerned about data sovereignty, insisting that government data be stored in the country, driving demand for national data centers. Software parks have also become popular in developing nations as a way to grow their digital economies, and data centers are essential for these facilities. Although the operation of a data center does not create many jobs, they are an essential platform for companies using them to generate revenue and employment.

Telecommunications carriers are particularly keen on data centers as a way to offset declining revenue from traditional voice services. Japan's biggest carrier, NTT, is one of the largest data center operators in the world, with more than 140 across the globe. Leading carriers have formed a working group of the Open Compute Project for the adoption of common standards for data centers. Operators in developing nations from Paraguay to the Philippines are busy constructing state-of-the-art data centers. Mobile group Millicom has been launching data centers in African countries, and its Paraguayan data center won an award in 2016 for its modular design. The Philippines Long Distance Telephone Company has constructed eight data centers across the country to be close to IT parks and support its cloud-based service offerings.

But data centers require significant electricity to power and keep equipment cool. According to a study, data centers in the United States accounted for 2 percent of that country's electricity consumption in 2014.

The data center industry is therefore constantly looking for ways to reduce reliance on fossil fuels, particularly given the possibility of data rationing due to shortages of electricity:

This has made geographies with cool climates and abundant hydro or geothermal energy attractive locations for data centers. Google's Finnish data center is built in a restored machine hall designed by renowned architect Alvar Aalto and draws on water from the Bay of Finland for cooling. Its data center in West Dublin does not need air conditioning units because of Ireland's cool climate. Some developing nations have similar environments, making them ideal for data centers. The Data Center Services data center in the Thimpu TechPark draws on mountainous Bhutan's abundant hydropower and year-round cool climate and, in 2017, the government launched its first data center.

Many developing countries face a challenge competing with hyperscale data centers abroad given that electricity costs tend to be relatively high. In Rwanda, the government is considering subsidizing data center electricity costs to attract more digital companies to the country and for local firms to transition their websites to local hosting enterprises. Small island developing states generally have high electricity costs due to the absence of local energy sources: 8 of the 10 most expensive countries for electricity are such states. However, they are surrounded by a useful resource: cool seawater. As noted, Google uses seawater to cool its Finnish data center and Microsoft is testing underwater data centers. Mauritius has also experimented with ocean water to cool data centers. Some Pacific small island developing states and other coastal economies have taken advantage of new submarine cable connections to bundle data centers into the landing station, lowering construction costs. Samoa, which has among the highest electricity costs in the world (figure 2.4), installed an energy efficient prefabricated data center in its new cable landing station. Many developing nations also have abundant sunshine with great potential for solar energy to lower costs. This is the thinking of mobile group MTN, which deployed Africa's first solar data center at its head office in Johannesburg.

Figure 2.4 Price of electricity (US cents per kilowatt-hour)

Reliability is critical for data centers. Developing countries, particularly in Africa, will need to improve the quality of the electricity supply to create the proper environment to attract investment in data centers (box 2.1). This will require electricity sector reform and prioritizing reliability for firms.

IXPs and caches: Closer to the edge

Although trends suggest a move toward larger data centers, the tendency is toward pushing data closer to the user or the "edge" to reduce latency and lower costs. Having data close to end users is critical, particularly in the financial sector, in which a few milliseconds advantage has a huge potential impact. This is raising traffic on internet exchange points (IXPs), places where telecom carriers and content providers come together to exchange their traffic (peering). This is cheaper, particularly for developing countries, since internetwork traffic does not need to be sent over costly international links only to return. In addition, ISPs do not need to make peering agreements with each potential partner. IXPs also improve quality since they are situated closer to the user and hence have less latency. "Soft" benefits are also associated with IXPs, such as developing technical skills and fostering a culture of cooperation, helping to sustain the internet. As the volume of data transmitted over the internet accelerates, IXPs have become even more relevant for ensuring that it is quickly exchanged among different parties.

The largest IXPs (measured by traffic or members) are mainly in Europe, with its long tradition of multistakeholder internet cooperation. The biggest is the German Internet Exchange (DE-CIX) founded in 1995, with locations in Dusseldorf, Frankfurt, Hamburg, and Munich. DE-CIX Frankfurt is the world's leading internet exchange, with peak traffic of 5.6 terabits per second in March 2017. More than 700 networks are connected, and access is available from 20 data centers across the city. The networks connected to DE-CIX are a smorgasbord of giant telecommunication carriers (such as Deutsche Telekom, China Telecom, Verizon, and NTT) and emerging country operators (such as Sri Lanka Telecom, Telkom South Africa, and Telkom Indonesia), big IT firms (such as Apple, Google, and Microsoft), and content and service providers (such as eBay and Facebook). DE-CIX began expanding abroad in 2012 and now operates IXPs in Dallas, Dubai, Istanbul, Madrid, Marseille, New York, and Palermo.

Although IXPs are burgeoning in most developed markets, growth has been uneven in developing nations. According to one source, 78 economies are still without an IXP (map 2.1).

Map 2.1 Internet exchange points around the world, 2018

The establishment of an IXP is often hampered by small markets, vested interests, and limited or unbalanced competition. Powerful incumbents with a high level of control over international gateways prefer that ISPs use their overseas links for IP transit. Nevertheless, developing regions, such as Latin America and Africa, have been adding ISPs at relatively high levels (table 2.2). Where no powerful incumbent exists, IXPs can thrive. This is the case of the Rwanda IXP, where the historical operator no longer exists. The IXP has 13 members, including all of the country's infrastructure-based ISPs. Peak traffic load was over 1 gigabit per second in March 2017, up more than 50 percent from the previous year. An IXP is particularly relevant in landlocked countries like Rwanda, which is far from undersea fiber-optic cables.

Table 2.2 Internet exchange points by region

	Internet exchange points				Domestic bandwidth production
Region	February 2016	February 2017	Net change	Percent change	February 2016	February 2017	Net change	Percent change
Europe	136	175	+39	+29	35.9T	41.8T	+5.84T	+16
North America	81	94	+13	+16	3.41T	4.55T	+1.14T	+33
Asia and Pacific	75	92	+17	+23	2.56T	3.51T	+953G	+37
Latin America	45	72	+27	+60	2.22T	2.75T	+524G	+24
Africa	30	42	+12	+40	325G	417G	+92.6G	+29