establishing a national internet exchange point
TRANSCRIPT
Ref: 18335-46
Establishing a national Internet exchange point
Michael Kende
Information for regulators and policymakers
January 2011
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Source: Cisco Visual Networking Index, 2010
Creating a hub for Internet traffic is increasingly important
for governments
Governments worldwide recognise the need to optimise
Internet connectivity, given the changes shown alongside
Governments, businesses and citizens benefit from
increased connectivity within their country as well
as from access to the Internet worldwide
The economy benefits from increased investment
and innovation in the services and applications for
domestic and international use
A national Internet Exchange Point (IXP) can act as a hub
that enables content and access providers (both domestic
and international) to reduce costs and improve access
This document aims to highlight to national governments
the significant benefits that an IXP can bring to a country
It also demonstrates how Analysys Mason, a leading
specialist technology, media and IT advisory company, is
supporting national governments to achieve their aims
Overall Internet traffic volumes are increasing
significantly, reflecting both an increasing number of users
and more usage per user
At the same time, Internet traffic is increasingly generated
by services that have a high demand for bandwidth and a
high sensitivity to latency, such as voice and video
0
2000
4000
6000
8000
10 000
12 000
2006 2007 2008 2009 2010 2011 2012 2013 2014
PB
pe
r m
on
th
Web and email File sharing
Internet gaming Internet voice
Internet video com. Internet video to PC
Internet video to TV
Internet traffic trends, 2006–2014
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A successful IXP can yield significant benefits in network
performance and cost savings …
An IXP enables the networks that make up the Internet
to connect to one another cheaply and efficiently at a
single location
Each network can use a large connection to the
IXP to interconnect with multiple other networks
(rather than multiple links to each network), and so
benefits from corresponding cost savings
An IXP also improves the performance of Internet
services by reducing the number of hops required
to route traffic between networks, thus decreasing
latency
Proximity to an Internet hub in another country can
reduce latency and costs, but is no longer a sufficient
solution
A number of countries are taking steps to reduce
the „tromboning‟ of their domestic traffic through an
IXP in another country
The greatest benefits of an IXP result from being
an Internet hub, not a spoke
Source: Analysys Mason
Efficiency gains from an IXP
ISP2
ISP3
ISP1
IBP
Content
provider
Global
connectivity
ISP2
ISP3
ISP1
IBP
Content
provider
Global
connectivity IXP
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… which can bring significant further benefits
Successful IXPs have brought considerable benefits to
the economies, telecoms and Internet industries of
their host countries, including:
significant cost savings to accommodate
increases in traffic, by reducing the cost of
interconnection between domestic and
international ISPs and content providers
improved quality of service, with fewer hops for
transmissions that lower latency while also
enhancing the security of communications
encouraging the hubbing of international as well
as domestic IP traffic: the best IXPs exchange far
more Internet traffic than is generated in their
host country
These benefits have multiplier effects for the rest of the
economy in terms of investment in infrastructure,
technical staff, and other indirect benefits such as
growth in the local industry (see the figure opposite)
Network
performance
and cost
improvement
Indirect
economic
benefits
Investment in
new online
services that
need better
network
performance
Investment in
IXP by
international
carriers and
content
providers
Higher
broadband
take-up
Direct and indirect benefits that
arise from an IXP
Source: Analysys Mason
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Successful Internet exchanges have become an integral
part of the global Internet
DE-CIX in Germany is the biggest IXP in terms of traffic volume – including significant amounts from Eastern Europe.
NetNod, in Sweden has significantly improved the efficiency and performance of Internet services in Sweden, where it
acts as a major point of domestic traffic exchange.
LINX in London and AMS-IX in Amsterdam were founded in the early days of the Internet, and established themselves as
major international hubs for traffic exchange.
In Singapore and Malaysia, governments have sought to encourage the establishment of IXPs, in recognition of the
benefits they can bring.
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Setting up an IXP can involve four key phases of work …
Review existing local and
international connectivity
and regulatory policies
Benchmark international
best practice
Develop options, and
evaluate strengths and
weaknesses
Forecast impact of IXP on
industry and economy
Plan implementation
strategy
Develop detailed business
plan
Design internal
architecture and network
connectivity
Determine suitable
locations
Assess financing options
Consult relevant
stakeholders
Explore operational and
delivery structures and
costs
Formulate a governance
structure for the IXP
Develop policies and
standard operating
procedures
Develop wider policies
and regulations to
promote use of the IXP
Promote participation of
relevant stakeholders
Procure facilities,
equipment and services
Run tendering processes
and evaluate responses
Support negotiations
through to contract award
Feasibility Planning Policy Delivery
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… that encompass the capabilities of Analysys Mason
We are telecoms and IT specialists with:
unparalleled operational know-how
comprehensive knowledge of relevant policies and technologies
around the world
significant economic and financial expertise
an in-depth understanding of all types of organisation involved in
telecoms and IT
awareness of both local and global situations and markets
Our independence means we can give impartial advice that is based on
industry best practice and is fit for requirement
Analysys Mason has significant experience of:
advising governments on the benefits of establishing an IXP
strategies for encouraging IXP development
setting up a suitable regulatory framework
the economics of peering and transit
procurement and installation
Examples of our experience are provided by the case studies discussed
below
Analysys Mason propositions
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Our global presence serves a client base covering over 100
countries worldwide
Analysys Mason office
Assignments completed
Cambridge • Dubai • Dublin • Edinburgh • London • Madrid •
Manchester • Milan • New Delhi • Paris • Singapore • Washington DC
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IXP regulatory policy advice
For the Infocomm Development Authority of Singapore
(IDA), Analysys Mason conducted a study of the role
that Internet exchanges have played in promoting
extensive domestic connectivity between Internet
providers, in 11 countries around the world. We
identified particularly successful Internet exchange
models, as well as how dependent their success has
been on local-specific factors. Our study provided
policy suggestions for how to further promote local
connectivity within the client‟s country, both through
Internet exchange(s) and more generally.
Setting up an Internet exchange
For the IDA, Analysys Mason provided advice on the
establishment of a neutral internet exchange point in
the country. This included determining the
governance, corporate and ownership structure,
consulting with the industry to ensure wide support for
the initiative, building a detailed business plan, and
writing the technical policies, procedures and service
level agreements for the exchange. The client used
the material we produced as the initial documentation
for the incorporation and establishment of the
exchange.
We worked extensively with the Singapore
government to study and set up an IXP …
Study of economic benefits of Internet exchanges
For the IDA, Analysys Mason completed a study into
the benefits and strategies to set up an Internet
exchange. We provided an analysis of the current
position of national Internet connectivity, forecast the
impact of an exchange and estimated the benefits to
both the telecoms sector and the broader economy in
our client‟s country.
The Singapore Exchange (SGIX) launched in June 2010 – more information at http://sgix.sg/en/
Feasi-
bility Planning Delivery Policy
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… and the national regulatory authority of a
major Middle Eastern country
IXP regulatory policy advice
For the national regulatory authority of a major
Middle Eastern country, Analysys Mason is
providing advice on regulatory policy development
regarding the establishment of Internet exchange
points in the country. This involves a detailed
analysis of Internet traffic routeing and exchange
conditions, both domestic and international, as well
as benchmarking the local situation against 15
countries and 10 Internet exchanges around the
world. Our findings and advice will be put to public
consultation, and subsequently used to draft legal
instruments to execute the relevant policy
decisions.
Feasi-
bility Planning Delivery Policy
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We have worked on Internet connectivity issues
worldwide [1]
Analysys Mason participated in a consortium
including leading European academics that drafted a
study entitled “Competition, Contents and Broadband
for the Internet in Europe” as part of the European
Union‟s Sixth Framework Programme focusing on
Information Society Technologies. We contributed a
report analysing the IP interconnection market in the
USA and compared it with that in the European
Union.
Study of peering policy
For Telstra in Australia, Analysys Mason prepared a
report documenting the decisions taken by a number
of regulators around the world not to regulate
interconnection between Internet backbone providers.
This paper was filed along with Telstra‟s submission to
the Australian Competition and Consumer
Commission (ACCC), as part of a proceeding
investigating whether the ACCC should regulate
Internet interconnection in Australia.
Submission on peering
Feasibility Planning Delivery Policy
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We have worked on Internet connectivity issues
worldwide [2]
Analysys Mason was retained by Verizon and MCI to
provide an expert opinion regarding the impact of their
merger on the Internet backbone sector. We provided
two declarations that were filed at the Federal
Communications Commission and also provide
analysis used to support the merger in front of the US
Department of Justice and the European Commission.
Impact of merger on Internet backbone sector
For a major US Internet backbone provider, we
studied the policy of peering as a form of
interconnection with other backbones. We proposed
and analysed a number of alternatives to peering, in
the context of future industry trends.
Study of backbone peering policies
Feasibility Planning Delivery Policy
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We understand the cost–benefit of connectivity
Working closely with the UK Cabinet Office, we developed
a proposal for the aggregation of public sector demand for
broadband networking over the next 10 to 15 years. We
evaluated the costs and benefits of this proposal against a
range of alternatives, considering the financial and
economic impacts at national and regional levels. The work
was based on our forecasts of total demand for broadband
(both public and private sector) mapped in detail across the
UK. Our public sector forecasts were based on extensive
case studies and interviews across a wide range of end
users.
Cost–benefit analysis for broadband networks
We assisted a European government in developing the
concept of a „digital park‟, to provide a location and focus
for information industries. To test demand for the park, we
researched companies in relevant sectors and those
interested in inward investment (e.g. telecoms,
broadcasting, film, multimedia, education & training,
software and IT companies). We outlined the design
characteristics for the park, including broadband at low
tariffs, a good supply of technical and creative skills, a high-
quality physical environment and financial assistance for
capex and training. The client implemented the digital park
in the form we recommended.
Digital park planning assistance
Feasibility Planning Delivery Policy
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We know about network connectivity and data
centres [1]
We prepared a market assessment and forecast of the
Internet backbone connectivity market for a global satellite
operator. We profiled market conditions, and in particular
ISP market developments, by region and in 18 individual
countries in Latin America and Asia–Pacific. We reviewed
competitors in the Internet backbone connectivity market,
both terrestrial and satellite operators, and forecast the
Internet backbone connectivity market, split by satellite and
fibre-delivered services. Results from our work provided
input into the client‟s market entry strategy, as well as its
business case modelling and implementation planning.
Market assessment of an IP gateway service
On behalf of a leading investment bank, we carried out a
due diligence investigation of a leading European data
centre operator that provides co-location and data centre
support services. The project involved an in-depth review
of the company‟s business plan assumptions and, in
conjunction with the management team and the bank, we
revised assumptions for the plan to support a GBP100
million debt syndication process.
Due diligence for a data centre operator
Feasibility Planning Delivery Policy
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We assisted a new CLEC in a major South American
country to understand the fit of a data centre
proposition with the company‟s strategy. This included
analysis of the potential of the data centre market, and
the development of market scenarios to help our client
choose from the different options open to it, in terms
of issues such as services, partnering and scale of
investment. We also developed a business plan for
the data centre.
Data centre strategy for incumbent operator
We advised on the design, management and
execution of the build-out of a data centre for Cathay
Bank, including the cabling infrastructure, and
converged IP voice and data network. Our work also
included providing advice on managing the move of
technical equipment for more than 300 office staff.
Data centre design and implementation
We know about network connectivity and data
centres [2]
Feasibility Planning Delivery Policy
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We help clients run programme management
offices
For 3‟s operations in Sweden and Denmark, we
programme managed a portfolio of cross-functional
launch-critical projects covering marketing, sales,
products and services, engineering, network roll-out
and IT. We developed the engineering procurement
strategy, processes, policies and procedures, and
provided the core team, including the Head of
Programme Office and Procurement Manager.
Programme management, PSO, organisation
planning, and contract management
Vodafone UK wanted to improve its network coverage
along the UK‟s railways. Analysys Mason managed
the project, including acquisition, baselining, network
planning, procurement, site design, and acceptance
and handover. Our best-in-class project management
delivered capex and opex savings, and the speedy
roll-out of a system that, in roll-out timescales, met the
requirements and specifications.
Major 2G/3G network procurement and roll-out
Feasibility Planning Delivery Policy
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For more information, please contact
Michael Kende (Partner)
Tel: +1 202 331 3080
www.analysysmason.com
Cambridge
Tel: +44 (0)845 600 5244
Fax: +44 (0)845 528 0760
Dubai
Tel: +971 (0)4 446 7473
Fax: +971 (0)4 446 9827
Dublin
Tel: +353 (0)1 602 4755
Fax: +353 (0)1 602 4777
Edinburgh
Tel: +44 (0)845 600 5244
Fax: +44 (0)845 528 0760
London
Tel: +44 (0)845 600 5244
Fax: +44 (0)845 528 0760
Madrid
Tel: +34 91 399 5016
Fax: +34 91 451 8071
Milan
Tel: +39 02 76 31 88 34
Fax: +39 02 36 50 41 09
New Delhi
Tel: +91 11 4700 3100
Fax: +91 11 4700 3102
Paris
Tel: +33 (0)1 72 71 96 96
Fax: +33 (0)1 72 71 96 97
Singapore
Tel: +65 6493 6038
Fax: +65 6720 6038
Washington DC
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Fax: +1 202 331 3083
Manchester
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Fax: +44 (0)845 528 0760