How IXP Proliferation Strengthens the Domestic
Internet Economy
By Bevil Wooding
The complex arrangements that have evolved to support the flow of traffic on the Internet remain a mystery to many. At the center is a simple facility, with a very significant role – the Internet exchange point – the bandwidth factory of the Internet and a cornerstone in the foundation of the Internet economy. Those countries coming into an understanding of this foundation are the ones positioning themselves to take advantage of it. Such countries are also the ones with the best chance of securing their digital future.
Growing Bandwidth
In computer networking, bandwidth, in simple terms, is the rate at which data is sent and received. Most Internet-based applications and services depend on bandwidth, typically lots of it, to work. Whether you are downloading a photo, uploading a movie, or simply sending email, you need bandwidth. The more bandwidth you have available, the more you can do with the Internet.
Just as the farmers need access to transport routes to get their produce to the market, the Internet economy needs access to bandwidth to get data packets to consumers. And, as with any industry, dependence on external suppliers for essential inputs can be both expensive and constraining to growth. Understanding how bandwidth is “manufactured” is important to building out the Internet economy in any country.
This is why, as economies and societies become increasingly dependent on Internet–based applications and services, there should also be deliberate efforts to secure the inputs necessary for building a sustainable domestic Internet economy.
The Domestic Internet Economy
Behind all the websites, video downloads, music streaming, e-shopping, VoIP calling, mobile apps, and social networking lie thousands of networks of computers and servers all connected to form the global Internet. These networks exchange traffic in the form of electronic data packets. These packets contain information about the sender, the destination, and the contents, allowing the computer networks to know what is supposed to go where.
The cost to move these packets around the world is the product of the speed of the service and the distance covered (i.e., speed x distance = cost). In other words, the further afield you go to collect or drop off data packets, the more expensive, and slower, it will be. Consequently, any local service dependent on Internet traffic exchange will be slow and expensive if that exchange happens at a far-away place rather than nearby.
This is why domestic Internet traffic exchange is so important to the Internet economy. And the proven mechanism for facilitating domestic traffic exchange is the Internet exchange point (IX or IXP).
IXPs - the Heart of Internet Traffic Exchange
An IXP is a physical facility that allows different Internet service providers (ISPs) to exchange Internet traffic between their networks without cost. A local IXP is where bandwidth is created and deployed as participating ISPs establish very high speed, highly reliable and relatively inexpensive connections between their networks. In effect, IXPs serve as local bandwidth factories, cranking out capacity for domestic Internet usage. And, where there is a surplus of capacity, it can even make bandwidth available for export.
In January 2013 the Organisation for Economic Cooperation and Development (OECD) released a report titled, “Internet Traffic Exchange: Market Developments and Policy Challenges”. The report, one of the most comprehensive studies to date on the role and value of IXPs, stated:
“Internet exchange points (IXPs) are the source of nearly all Internet bandwidth. A country that lacks IXPs must import Internet bandwidth from other countries that do possess them. Like factories and farms, they are a primary means of producing a commodity that‘s potentially quite expensive to import.”
Thus it‘s always preferable to use a local IXP, to one that‘s further away.
As a result, IXPs proliferate in areas where Internet service providers, users, and policy makers are well-informed on matters of telecommunication economics.
A corollary is that a region which has many functioning IXPs and produces more bandwidth than it consumes can export bandwidth to other regions at a profit.”
With any commodity, such as oil or gas, if a country has a lot of it, prices fall; if it doesn’t and has to import, prices rise. It’s the same with bandwidth on the Internet. The Netherlands, for example, is a net exporter of Internet bandwidth. That country uses about half the bandwidth it produces at its five domestic exchange points. This allows Internet companies to purchase bandwidth there at rates that are significantly lower than in other places.
But where there isn’t an IXP, prices remain high as ISPs have to pay exorbitant prices to move traffic – even domestic-bound traffic. This is why for countries in emerging markets in Africa, the Pacific, and the Caribbean region, IXP proliferation is an essential component in securing and building out the domestic Internet economy.
Developing Momentum
Several developing countries have already moved to secure their digital future. No country is too small, as recent IXP deployments in small-island states such as Curacao, Dominica, Grenada, St Maarten, and Vanuatu have proven. These countries have taken a vital step in the longer journey toward the development of their domestic Internet economy.
For the majority of developing countries, though, Internet traffic routing remains inefficient, unnecessarily expensive, and consequently, a hindrance to national development agendas. But momentum for change is growing.
Packet Clearing House has been championing IXP proliferation in emerging markets for over two decades. Its efforts are now being complimented by organizations such as the Caribbean Telecommunications Union, regional Network Operator Groups (NOGs), the Internet Society (ISOC), the OECD and others, in a global campaign to increase the number of IXPs in emerging markets.
Success in manufacturing more Internet bandwidth and building the domestic Internet economy is a long-term process. As the OECD report highlighted, this process ultimately depends on taking the time to ensure that Internet stakeholders are “well-informed on matters of telecommunication economics.”
Bevil Wooding is an Internet Strategist with Packet Clearing House. Follow on Twitter: @bevilwooding or: facebook.com/bevilwooding