establishing an internet exchange point in oman · merits of establishing an internet exchange...

Establishing an Internet Exchange

Point in Oman

Public Consultation on the Implementation Options

31 March 2015

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Contents

Establishing an Internet

Exchange Point in Oman

1 Introduction ....................................................................... 3

1.1 Overview of the matters for consultation .................................................. 4

1.2 Status of the consultation document ........................................................ 5

1.3 The consultation process ......................................................................... 5

1.4 Comments on the consultation document .................................................. 6

2 Context to this consultation .................................................. 7

2.1 IXPs ..................................................................................................... 7

2.2 General benefits of IXPs ......................................................................... 9

3 The expected benefits of an Omani IXP ................................ 12

3.1 Potential demand for an Omani IXP ........................................................ 12

3.2 The benefits an IXP could be expected to bring to the market ................... 18

3.3 Key enablers and requirements for a successful launch of an

Omani IXP ................................................................................................... 21

4 IXP implementation options ................................................ 29

4.1 IXP governance options considered ........................................................ 29

4.1.1 Option 1: Market-led approach .......................................................... 29

4.1.2 Option 2: Multi-stakeholder owned IXP ............................................... 30

4.1.3 Option 3: Independent IXP provider ................................................... 31

4.1.4 Option 4: Outsourcing model ............................................................. 32

4.1.5 Option 5: Government owned and operated ........................................ 33

4.2 Preliminary conclusions on the preferred IXP implementation

options ....................................................................................................... 33

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Contents

4.3 Further implementation considerations ................................................... 34

4.3.1 Recommended location of the IXP ...................................................... 35

4.3.2 Recommended funding model ............................................................ 36

4.3.3 Proposed implementation .................................................................. 37

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Public Consultation Introduction

1 Introduction

The Telecommunications Regulatory Authority (the “Authority” or “TRA”)

invites all interested parties to submit their views and comments on the

merits of establishing an Internet Exchange Point (“IXP”) in Oman. This

builds on a previous initiative by the Authority in 20081. In light of the

ongoing market developments in Oman and the common benefits of an

IXP experienced elsewhere, the Authority considers it important to revisit

the case for establishing an Omani IXP.

An IXP enables Internet Service Providers (“ISPs”) and operators of core

Internet infrastructure (such as DNS root and top-level domain name

servers) to exchange traffic with each other and interconnect. Due to

continuous growth in the Internet eco-system and overall Internet traffic,

the benefits for a country of establishing a local IXP have been increasing

in recent years. This is because deploying a local IXP can reduce

transmission costs, improve performance and enhance Internet service by

adding resiliency and robustness.

Despite increasing demand for and take-up of Internet services2, there has

been no market-led initiative to deliver a local IXP in Oman, as has

sometimes been the case elsewhere. As such, telecommunications

operators have had to seek alternative arrangements to exchange national

Internet traffic (including, until recently, the exchange of national Internet

traffic at an IXP outside of the country). Further, despite increasing

demand for national and international content3, local access to such

content remains limited to date.

1 In 2008, the Authority issued a public consultation on issuing an IXP licence in Oman. However, at that time, the consultation responses received indicated that there was insufficient interest from the market in an IXP. As such, the Authority decided not to pursue establishing the IXP.

2 In Q3 2014, 42% of all Omani households reported a fixed broadband connection and circa 68% of the total population had an active mobile broadband subscription.

3 According to a 2013 consumer survey prepared for the Information Technology Authority of Oman, the most common activities undertaken on the Internet reported by Omani

individuals include emailing (50% of individuals), social media networking (39%), downloading movies, images, music, TV and videos (39%) and education and learning activities (34%).

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Having reviewed the potential demand for and expected benefits from

establishing a local IXP in Oman (both are discussed further below), the

Authority has re-assessed the feasibility of establishing an Omani IXP.

Specifically, it has identified potential options for promoting the

development of an IXP, together with key enablers and requirements to

facilitate its successful launch. Having developed preliminary findings from

its analysis, the Authority now wishes to invite stakeholders, interested

parties and the public in general to comment on its emerging findings as

set out in the remainder of this document. The Authority will consider such

comments when preparing its final position on establishing an IXP in

Oman.

1.1 Overview of the matters for consultation

This Public Consultation is concerned with:

The expected merits of establishing an IXP in Oman and the

importance of balanced regulatory oversight (and, if required,

intervention) to facilitate its successful launch;

The scope of the regulatory oversight/intervention expected for

establishment of an IXP in Oman; and

The recommended ownership structure, operational and funding

model for an Omani IXP.

The remainder of this consultation document is structured as follows:

Section 2 provides the Authority’s preliminary view on the role and

common benefits of IXPs to market players, consumers and

beyond;

Section 3 then discusses the potential benefits that could arise

from establishing an IXP in Oman. It sets out firstly the Authority’s

assessment of the potential demand for an Omani IXP, followed by

an overview of the expected benefits from a local IXP, taking into

account the expected demand. The section then concludes with the

Authority’s initial views on the key enablers and requirements for a

successful launch of an IXP in Oman; and

Section ‎4 sets out potential set-up options for an Omani IXP, in

terms of the ownership structure, operational and funding models

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for the IXP. This builds on the assessment of the current market

environment, potential demand for a local IXP and key objectives

for it.

1.2 Status of the consultation document

The Consultation Document sets out the Authority’s preliminary views,

based on the consideration of the materials and information available to

the Authority at the time of writing. This Consultation Document does not

necessarily represent the final view of the Authority on any of the matters

consulted upon herein. The Authority is open to receiving and considering

the reasoned views and documented comments on all of these matters by

respondents to this consultation. As a result of this consultation process,

the Authority's views may or may not vary in relation to some or any

matters covered in the Consultation Document. Nevertheless, the

respondents are advised that the assumption they should entertain for

practical purposes is that, absent any further comment, the Authority is

likely to confirm the preliminary view expressed in the Consultation

Document. If respondents have a different view of the matter then they

should consider submitting that view together with reasons and, if

relevant, evidence in support.

1.3 The consultation process

This public consultation process is as follows.

Stakeholder workshop: During the consultation phase, the

Authority will host a workshop at its premises for all interested

parties. During the workshop, the Authority will briefly present the

key matters consulted upon, followed by an opportunity for

attendees to ask questions.

Consultation responses: Public telecommunications licensees and

other stakeholders and members of the public may make

submissions in writing in relation to the issues raised in the

Consultation. These should reach the Authority no later than 3.00

PM on 29 April 2015. All submissions will be published on the

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Authority’s website in due course following the expiry of this

deadline.

Following the completion of the above, the Authority shall consider all the

comments received and then publish a Position Statement.

1.4 Comments on the consultation document

This Public Consultation Document will be available on the Authority’s

website at http://www.tra.gov.om.

Respondents who wish to express opinions on this Public Consultation

Document are invited to submit their comments in writing to the

Authority. All comments must be received by the Authority no later than

3.00 PM on 29 April 2015.

Comments filed in relation to this Public Consultation Document may be

submitted to one or more of the following addresses:

a) E-mail to: [email protected]

b) Delivery (hard and soft copy) by hand or by courier to:

Telecommunications Regulatory Authority

TRA Premises at Seeb Airport Heights

(opposite Muscat International Airport)

P.O. Box 3555, P.C. 111,

Muscat, Sultanate of Oman.

The Authority welcomes all comments on the Public Consultation

Document. The Authority encourages respondents to support all

comments with relevant arguments and, if relevant, data, analysis,

benchmarking studies and information based on the national situation or

on the experience of other countries, to support their comments. In

providing comments, respondents are requested to indicate the question

number, paragraph or clause reference number to which their comments

relate. The Authority has prepared specific questions for respondents to

address if they wish. It would be helpful to the Authority if respondents

http://www.tra.gov.om/

mailto:[email protected]

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Public Consultation Context to this consultation

answered those specific questions of interest to them, but submissions

may take any form that the respondent chooses. The Authority may give

greater weight to comments supported by appropriate arguments and, if

relevant, evidence. The Authority is under no obligation to adopt the

comments of any Respondent.

In case any respondent wishes to keep any part of their response as

confidential, they should indicate that clearly and provide a redacted

version for publication. In absence of a redacted version, no submission,

or part thereof, will be considered as confidential.

2 Context to this consultation

This section of the consultation document describes the role and common

benefits of IXPs to the Internet market and beyond. It is primarily

provided to stakeholders for informational purposes.

2.1 IXPs

An IXP enables ISPs and operators of core Internet infrastructure to

exchange traffic with each other and interconnect. Global content

providers commonly have a local presence at major IXPs because these

locations are close (in networking terms) to end users.

Originally, there were a limited number of IXPs around the world. Because

of this, it was necessary to carry traffic all the way to one of these

locations for the purposes of interconnection; unless ISPs had bilateral

arrangements to interconnect traffic more locally (the latter is not feasible

in a market environment with many ISPs). However, there are a growing

number of countries worldwide which have now deployed IXPs, including

several Gulf Cooperation Council (“GCC”) member states.4

Generally, given the growth in the Internet eco-system and overall

Internet traffic, the benefits for a country of establishing a local IXP in its

4 For example, there are IXPs in the UAE (UAE-IX and SmartHUBIX) and in Bahrain (BIX).

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own market have been increasing in recent years. This is because

deploying a local IXP can reduce transmission costs, improve performance

and enhance Internet service by adding resiliency and robustness. For

example, local ISPs can exchange traffic with each other over a fast Local

Area Network (“LAN”) at a national or regional IXP, instead of having that

traffic travel over expensive international circuits. As a result, having a

local IXP can reduce network delays and transmission times, and also

reduce the susceptibility of local internet traffic to outages on international

(submarine) networks. Traffic between two IP-based networks in the same

city, for example, could be exchanged at the IXP instead of via

international links to an IXP in another country/continent, thus eliminating

the dependency on those international links.

The value of an IXP increases as more ISPs and content providers connect,

making the exchange more attractive to other ISPs and content providers

because there is a richer mix of organisations to exchange traffic with and

a better choice of international carriers. This becomes a virtuous circle, as

more connections encourage more organisations to connect and attract

new business, which in turn encourages yet more connections and content

providers to have a presence at the IXP.

IXPs have a variety of business models and governance structures. For

example:

The most successful European IXPs are non-profit mutually owned

organisations where the members are ISPs and content providers

who use the exchange.5

In North America, IXPs are commonly operated along commercial

lines and compete with each other on price and service to attract

business.

In small countries, an IXP might be operated by a national

academic research and education network, as a trusted and neutral

third party. Developing countries tend to have minimal exchanges

operated by volunteers, relying on donations of equipment and

5 This includes, for example, the London Internet Exchange (LINX), the Amsterdam Internet Exhange (AMSIX) and the Irish IXP (INEX).

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expertise from established IXPs and/or funding from international

donors, such as the World Bank and the Internet Society.

In some countries, the national IXPs are controlled or operated by

the incumbent or managed by either the government or the

communications regulator.

2.2 General benefits of IXPs

The benefits commonly associated with national IXPs are listed in Table 1

below. For ease, these have been grouped into six main categories.

However, the Authority acknowledges that there is an overlap between

these categories.

Type Key benefit

Efficiency Lower interconnection and international IP transit costs per Mbps,

arising from more efficient routing of national traffic, which can

ultimately reduce the cost of Internet access and usage for end-users

Simplified, scalable interconnect arrangements between operators

Achieving economies of scale and cost reductions by pooling resources

(for example, by negotiating better pricing and/or extra bandwidth on

international links than an ISP could obtain by itself)

Competition Enhanced competition in provisioning Internet services from ISPs due

to lower interconnection, transit and international link costs, and

reduced dependency on incumbent operators’ infrastructure

Enhanced access to international transit providers located at the IXP,

facilitating competitive transit offerings to local ISPs

Access to

content and

services

Attracting global content providers and carriers to a local market by

offering them an access point for delivering services to local ISPs

and/or providing contact from a platform which is closer to end users.

This provides local ISPs and end-users with better access to

international content

Facilitating the development of local content providers by gaining

access to international end-users from attracting international ISPs by

offering them an access point for local content

Promoting local ICT service market development for co-location

services (such as hosting and cached services) and services that

require high bandwidth and low latency (such as real-time and

multimedia services)

Facilitating local content provisioning and hosting due to more

bandwidth becoming available for local users, as a result of lower costs

of connection and faster local links

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Quality of

Experience

Enhanced user-experience due to more efficient routing of national data

traffic (reducing latency and other technical quality defects)

Facilitating the establishment of routing arrangements among ISPs to

reduce congestion and provide redundant back-up paths in the event of

upstream network outages

Enhancing end-user quality of service

Security and

network

resilience

Allowing ISPs to keep local Internet traffic within national borders, so

reducing privacy and security risks associated with sending sensitive

data across national borders over multiple hops

Other Providing a platform to encourage inwards investment, facilitate links

between local and overseas businesses and also provide a trusted,

neutral forum for local Internet businesses to network

Benefits to the wider economy, to the extent that the IXP facilitates

development in the domestic Internet market. The impact of a well-

functioning Internet market can benefit the wider economy in many

ways, for example by facilitating higher productivity and innovation.

However, an IXP is only a small part of the wider Internet market, and

so the scale of any direct benefit from an IXP is likely to be limited

In general, IXPs tend to grow organically. They usually begin when the

ISPs in a country or region see the benefits of interconnecting their

networks in a neutral setting. Sometimes the ISPs will arrange this by

themselves, particularly in more developed Internet markets where it is in

the commercial interests of ISPs and others. On the other hand, the

establishment of an IXP sometimes requires regulatory or government

intervention. This is particularly the case in less developed Internet

markets which are characterised bylimited competition, and where the

short-term benefits to ISPs and other players are smaller.

Once the IXP is operational, it can attract other national players: smaller

and/or newer ISPs, hosting companies, government and education

networks, and so on. This makes the IXP an attractive prospect for

international operators and content providers, because there is a viable

local market for their services at the IXP. Carriers can offer transit services

to local ISPs and content providers, while global content delivery networks

have ready access to the end users of those ISPs. This becomes a virtuous

circle. As more organisations connect at the IXP, it becomes more

attractive for others to connect there. This is illustrated in the graphic

below.

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Attractiveness of connecting

to IXP

Organisations connect to IXP

Global content

providers

International

carriers

Smaller/new ISPs

Hosting

companies

Government/

education networks

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Public Consultation The expected benefits of an Omani IXP

3 The expected benefits of an

Omani IXP

This section of the consultation document describes the Authority’s views

regarding the potential benefits that could arise from establishing an IXP

in Oman. First, the section assesses the potential demand for an Omani

IXP. This is followed by an overview of the expected benefits from a local

IXP, taking account of the local demand for the IXP. The section concludes

with a discussion on the key enablers and requirements to facilitate the

successful launch of an IXP in Oman, including the need for balanced

regulatory oversight and, if required, intervention. As such, this section

provides the basis for the review of the IXP implementation options, set

out in Section 4 below.

3.1 Potential demand for an Omani IXP

Below, the Authority sets out the reasons why it currently considers there

to be potential demand for the establishment of an IXP in Oman. This

takes into account the current situation in Oman in terms of the market

for Internet services and the Authority and key stakeholder objectives in

establishing an IXP, as well as the stated demand for an Omani IXP by key

stakeholders. To facilitate its understanding of the potential demand for an

Omani IXP, the Authority conducted a series of meetings with key relevant

stakeholders in November 2014. The feedback received during those

meetings has been taken into account below.

3.1.1 Current market environment

The current market characteristics in Oman are crucial to determining the

extent of the benefits an Omani IXP can generate, and the key challenges

that may need to be overcome if the IXP is to be launched successfully. As

such, the Authority briefly sets out below the key characteristics of the

market for Internet services in Oman, as they are relevant to the IXP.

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Market structure and competitive dynamics

There are two licenced ISPs active in Oman, providing Internet services to

end-users based on their own fixed and mobile network infrastructure:

Omantel and Nawras/Ooredoo (Ooredoo hereafter). Both ISPs own and

operate their own international facilities.

Competition in the market for Internet services in Oman is limited. In the

2013 Market Definition and Dominance (“MDD”) report,6 the Authority

found Omantel and Ooredoo to be (jointly) dominant in a number of

wholesale service markets relevant to the provisioning of Internet services

in Oman. In particular:

Omantel was found to be dominant in the wholesale markets for

network infrastructure access at fixed location and terminating

segments of leased lines (Markets 12 and 14 respectively); and

Omantel and Ooredoo were found to be jointly dominant in the

market for wholesale broadband access at a fixed location, trunk

segments of leased lines and IP international bandwidth capacity

(Markets 13, 15 and 16 respectively).

Given the above dominance findings, both ISPs are required to supply

relevant wholesale services and publish a reference offer containing these

wholesale service offerings. The prices for these services are subject to

price control by the Authority.

Both ISPs were also found to be jointly dominant in the retail market for

broadband internet access at a fixed location.

Consumer demand, preferences and user experience

There is high penetration of Internet services in Oman. 42% of households

have fixed broadband Internet access, and 68% of the total population

have access to mobile broadband services.7

According to a recently conducted consumer survey,8 the most common

activities undertaken on the Internet reported by individuals include

emailing (50% of individuals), social media networking (39%),

downloading movies, images, music, TV and videos (39%) and education

and learning activities (34%). E-government and e-commerce currently

have low take-up and usage in Oman. Less than one in six users of e-

government services have used it for anything more complex than

6 ‘Market Definition and Dominance Report 2013 - Market Analysis Report on Telecommunications Network Services in Oman’, dated May 2013

7 Source: TRA Quarterly Indicators 8 “ICT Household survey Oman 2013” conducted for the Information Technology

Authority of Oman.

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obtaining information or downloading official forms.9More complex

activities would include submitting completed forms or using online

services, such as paying electricity public utilities bills. For e-commerce,

85% of Internet users in Oman have never ordered or bought anything

through the web.10 This suggests there may be significant opportunities to

expand the use of e-government and e-commerce in Oman.

Consumers also report poor user experience. In particular, 95% of

individuals consider that the Internet speed is slow and 72% experience

frequent interruption to their service.11 The Authority notes that IPv4

address allocations to Oman are currently very low compared to the

population.12 This suggests that NAT (network address translation)

systems and/or proxies are needed to provide connectivity to the rest of

the Internet. In the Authority’s view, this may be causing further

bottlenecks and constraining access to the latest Internet-based services

such as gaming and social media.

Internet traffic trends

Total annual Internet traffic in Oman has increased significantly in recent

years, and this trend is expected to continue. For example, according to

information provided by the stakeholders, total peak hour international

Internet traffic has exceeded 50Gbps in 2014, and it is expected to reach

100Gbps in the near future.

Despite this overall growth in Internet traffic, national Internet traffic

remains limited. According to one stakeholder, national peak hour Internet

traffic represents less than 1% of total Internet traffic. Stakeholders

expect the absolute level of national Internet traffic to grow, due to more

local content and e-services becoming available. This will, in part, be

facilitated by improvements to Oman’s internal Internet infrastructure,

which should lead to the further increase of in-country traffic levels as a

result of initiatives such as The Oman Research and Education Network

(“OMREN”) and the Oman Broadband Company’s (“OBC”) fibre roll-out.

This is expected to help the development of more local content and

Internet usage more widely.

National Internet traffic routing

During the recent stakeholder meetings, both ISPs confirmed that they

have reached a commercial agreement to exchange Internet traffic

generated by their respective subscribers at the national level. The

9 Source: “ICT Household survey Oman 2013” 10 Source: “ICT Household survey Oman 2013” 11 Source: “ICT Household survey Oman 2013” 12 The Authority understands that Oman currently has approximately 500,000 IPv4

addresses for a population of 3.3 million.

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Authority understands that the parties have entered into a non-standard

peering arrangement. Such arrangements are becoming increasingly

common, especially where there is a traffic imbalance between the two

ISPs that are peers).

International capacity and connectivity

Omantel, Ooredoo and Telecommunication Oman (“Teo”) 13 operate their

own international facilities. Omantel currently has five landing stations

providing access to nine submarine cables, increasing to 11 during 2015.14

with a total capacity of 30.1 Tbps.15Ooredoo operates one landing station

and relies on the Tata Global Network (TGN)-Gulf and the Asia Africa

Europe-1 (AAE-1) submarine cables. Teo relies on satellite links, and has

an IP transit agreement with both Omantel and Ooredoo.16

Following the 2013 MDD report, the Authority is in the process of

implementing ex-ante regulation on both Omantel and Ooredoo with

respect to wholesale IP international bandwidth capacity. In particular, the

draft Access and Interconnection Regulation requires both licensees to

provide wholesale access to their landing stations.17

The Authority further understands that both Omantel and Ooredoo arrange

their own IP transit, and have set up points of presence (“POP”) at

international IXPs. During recent meetings, several stakeholders

expressed concerns about the prevailing costs for IP transit services, the

limited IP transit options currently available and the need to regulate

these services going forward.

Access to international content

Local access to international content remains limited in Oman. During the

stakeholder meetings, both Omantel and Ooredoo only made reference to

a small number of global content providers being present in Oman to date.

All Omani ISPs are guaranteed open and transparent access to the content

hosted by local ISPs, although at a commercially agreed price with the

hosting ISP. The Authority further understands that none of the Omani

ISPs are currently present at any of the regional IXPs.18 This is due to the

13 A third licensee currently offering prepaid calling card and mobile voice and messaging services on a resell basis by using Ooredoo’s network.

14 http://www.timesofoman.com/News/38396/Article-Omantel-to-invest-$71m-in-submarine-cable-project

16 “Developing a national broadband strategy for Oman”, final report to the Ministry of

Transport and Communications, March 2012 17 See for example: ‘Consultation on draft Access and Interconnection Regulation –

Position Statement’, March 2015. 18 This includes the UAE-IX and SmartHubIX in UAE or BIX in Bahrain

http://www.timesofoman.com/News/38396/Article-Omantel-to-invest-$71m-in-submarine-cable-project

http://www.timesofoman.com/News/38396/Article-Omantel-to-invest-$71m-in-submarine-cable-project

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limited perceived benefits (in terms of access to content and transit

providers) and associated costs (in terms of connecting to the IXP and the

IXP charges) of such IXPs.

3.1.2 The Authority’s and stakeholder objectives

Below, the Authority sets out its objectives for a local IXP in Oman, based

on its understanding of the common benefits of an IXP, and the potential

benefits of an IXP in the Omani context (see below). This is followed by an

overview of the Authority’s understanding of stakeholders’ objectives for

an Omani IXP, which is informed by its recent stakeholder meetings.

The Authority’s objectives

The establishment of an IXP forms one part of a wider strategy to develop

a market environment, both in terms of facilitating competition amongst

existing players and facilitating further market entry.

In particular, the Authority anticipates an Omani IXP would help achieve

the following objectives:

facilitate an efficient routing of national Internet traffic, delivered at a

high quality;

facilitate access to international content to all ISPs;

facilitate market entry by additional ISPs;

attract international content providers and international carriers to

Oman;

facilitate entry and development of local content providers; and

improve end user quality of experience (“QoE”).

Omani licensees’ objectives

Whilst most licensees19 are, in principle, supportive of an Omani IXP, there

are diverging views on the key objectives for it. In particular:

Ooredoo considers the development of an Omani IXP as a way of

creating a more level playing field between itself and Omantel. It

believes the IXP could provide it with improved access to international

content and transit carriers.

19 The Authority further notes that, whilst not being opposed to an Omani IXP, the OBC

expressed limited interest in an IXP in Oman. This may in part be related to the fact that the establishment of an IXP is not considered to be relevant to the OBC’s business.

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Teo sees the IXP as an important enabler for it to enter the market for

Internet services, and for it to compete with existing operators

(assuming that all existing ISPs locate at the IXP and offer national

peering as well as access to their content on a fair and reasonable

basis).

Given the limited national traffic and its recent IP interconnect

arrangement with Ooredoo, Omantel sees limited need for an IXP in

Oman, unless it allows Oman to become a regional peering and transit

hub, or it helps it to attract further international content providers.

Other stakeholders’ objectives

Other national stakeholders (i.e., the Research Council and the

Information Technology Authority (“ITA”)) are hoping that a local IXP

would enhance the provisioning of Internet services in Oman, and would

allow for the retention of national Internet traffic within Oman, which is an

important national security consideration.

Global content providers and content delivery network (“CDN”) operators

see IXPs generally as a means to install their servers and content nodes

close to ISPs’ networks, thus providing good access to end users. This

would also hold for an IXP in Oman.

In summary, based on its recent meetings, the Authority preliminarily

concludes that there is currently demand for an Omani IXP. However,

views on the scope and magnitude of the expected benefits (and thus

demand for an IXP) appear to differ between stakeholders. Whilst, in

principle, support for the IXP represents a positive development from the

Authority’s 2008 IXP consultation, there are still diverging opinions among

stakeholders on the exact scope and focus of a project for the creation of

an Omani IXP, and the preferred means of implementing this project.

Further, the Authority recognises that not all ISPs may decide to

voluntarily locate at the IXP or peer with potentially new ISPs, unless the

IXP attracts global content providers and carriers beyond those available

at the moment.

The Authority recognises that addressing the above objectives and

preferred implementation options for the Omani IXP will be an important

part of developing a successful implementation plan for the IXP. This is

discussed in part in Section 3.3 below, where the Authority sets out its

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views on the likely key enablers and requirements for a successful launch

of the Omani IXP.

Question

Do you agree with the Authority’s preliminary assessment of the potential

demand for an Omani IXP, based on the current market environment and

key stakeholder objectives? If not, please provide a comprehensive

justification for your position and provide details on your understanding of

any potential demand for an Omani IXP.

3.2 The benefits an IXP could be expected to bring

to the market

Considering the general benefits of a local IXP, as discussed in Section 2

above, the Authority is of the preliminary view that the successful

establishment of an IXP in Oman would bring benefits to the market and

key stakeholders within it.

It is important to note that an IXP is also just one element that contributes

to the functioning of a successful Internet eco-system. This, in turn, could

also benefit the wider economy in Oman, as a well-functioning Internet

market can benefit the wider economy, by, for example, facilitating higher

productivity and innovation.

Therefore, the Authority considers it important to differentiate between

the direct benefits brought by an IXP and the wider, more indirect benefits

that the creation of an IXP will give rise to. Below, the Authority focuses

on the potential direct benefits of an IXP only.

Given the current market environment (i.e., limited number of ISPs, low

share of national traffic and existing interconnection arrangement between

the two ISPs), several of the common benefits of IXPs are likely to be less

relevant to Oman in the short term. Instead, the Authority considers that

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the main short-term benefits of an Omani IXP would be the provision of

a neutral platform for the exchange of traffic at a single location. By doing

so, the creation of an IXP could help to facilitate further entry to the

market in the longer term, both by new ISPs and international content

providers and carriers locating at the IXP.

The long-term benefits of the Omani IXP are expected to be more

pronounced with the development of a multi-player market environment in

this manner. As such, these benefits could include, amongst others:

All ISPs could achieve cost savings on IP transit/international

connectivity services from lower prices (assuming that a

competitive market for these services develops at the IXP) and

higher demand (assuming that more global content can be

accessed at the Omani IXP). An IXP would further allow Internet

Operators (i.e., ISPs, content providers, anycast DNS providers,

CDNs and hosting companies) to save costs by only connecting to

the IXP, rather than having to establish connections to all of these

individually. There are also potential revenue opportunities from

launching new services, due to lower latency and access to more

global content, such as IPTV and video calling services.

Facilitate market entry by other ISPs. Further to the benefits

above, new ISPs may also benefit from cost savings on IP

transit/international connectivity services under an IXP. Secondly, a

neutral platform with (potential) access to global content providers

and carriers at the IXP creates a more level playing field for

potential market entrants to compete with existing ISPs.20

Enhanced Internet reliability andsecurity. An IXP should mean

lower and more stable round trip times for traffic between those

using the exchange than when that traffic is “tromboned” over

international and intercontinental links. The routing arrangements

amongst ISPs located at the IXP would reduce congestion and

provide redundant back-up paths in the event of network outages.

20 The Authority is cognisant that the IXP is likely to represents only part of an ISPs decision to enter the market, with other legal, regulatory and general market dynamics also playing an important role.

20


Further, an IXP would make it easier to identify and resolve

connectivity problems as there would be fewer parties in the paths

between the networks.21 Lastly, there would also be benefits

around Internet security, as there would be less need to

interconnect traffic internationally. Most, if not all, internal Omani

traffic would remain in-country. Confidential or sensitive Omani

data would not need to be carried across international links to be

exchanged at an overseas IXP and would pass through the Omani

IXP instead.

End-users are likely to benefit from a better user-experience on

existing services, gaining access to a wider range of service

offerings (e.g., IPTV and video calling) and potentially lower end-

user prices, if ISPs passthrough some of their cost savings to retail

prices (which, in a competitive market, we expect they would, as

savings relate to marginal costs). Some Internet services would

benefit from the lower latency and more stable round-trip times

that can be expected when traffic passes though Oman’s IXP, thus

providing better service for end-users.

Despite the potential demand for and benefits of the Omani IXP discussed

in Section 3.1 and 3.2 above, the Authority recognises that there has been

no market-led initiative to deliver the IXP in Oman to date. This stands

in contrast to the experience in some other jurisdictions, where IXPs have

been set up by the market. This is likely to be linked to the current market

structure and traffic flows (see discussion in Section 3.1.1 and 3.1.2

above). Given this, the successful launch of an IXP is likely to require

some regulatory oversight on the part of the Authority and, if required,

regulatory intervention. These are further discussed in Section 3.3 below.

21 This could represent an important benefit given that, according to a recent study, 72% of individuals in Oman report frequent interruption to their Internet service. )Source: E-oman, (2014), “ICT Household survey Oman 2013”). However, the

Authority recognises there are likely to be other causes of these interruptions which would be unaffected by the IXP (such as, for example, prevailing issues in the operators’ access networks).

21


Question

Do you agree with the Authority’s preliminary assessment of the expected

benefits of an Omani IXP? If not, please provide a comprehensive

justification for your position and provide details on your understanding of

the expected benefits from an Omani IXP.

3.3 Key enablers and requirements for a successful

launch of an Omani IXP

Based on the objectives and current market dynamics set out above, the

Omani IXP will require a range of measures to facilitate its successful

launch. Set out below are a number of key issues that the Authority has

considered in developing its initial proposals.

The Authority also notes that there are further potential constraints,

beyond the control of the Authority and the IXP, which may impact the

establishment of an IXP in Oman. In particular, there is already a range of

established IXPs in the region. Whilst the Authority understands that none

of these have so far managed to grow into a regional hub, there is a

prevailing risk that, if this changes going forward, the Omani IXP’s ability

to attract global players may be hampered.

3.3.1 The need for regulatory intervention

A first consideration is whether an Omani IXP could be launched

commercially, without government or regulatory intervention. The limited

short-term benefits, as discussed above, and the current structure and

size of the market (including the commercial arrangement between the

existing ISPs to exchange national traffic) suggest that intervention is

necessary. This is supported by the fact that, as yet, no commercial

attempt has been made to launch an IXP in Oman, despite the 2008

consultation and evidence of commercial launches elsewhere in the world.

This is likely to remain the case despite recent market developments. For

these reasons, the Authority considers it likely that government or

regulatory oversight will be required to ensure the success of this

initiative.

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3.3.2 Key enablers

A key enabler to a successful launch of the Omani IXP is its ability to

attract local ISPs and international carriers and content providers to locate

at the IXP. Ensuring that the IXP is independent and perceived to be

neutral will attract new ISPs, whereas the incentives for existing ISPs’

participation are likely to be linked to the number of parties located at the

IXP.

Independence of the IXP

International precedent and discussions with stakeholders have

highlighted that it is essential for any IXP to be considered neutral and

independent from any existing market player. Independence of the IXP

relates both to the location of the IXP, its ownership structure and

operational management.

The neutrality associated with an independent IXP is important to ensuring

that the IXP is established and operated in a fair, non-discriminatory

manner that ensures equal access to all ISPs by providing a neutral and

open access platform for ISPs, content providers, international carriers

and other parties to interconnect and exchange traffic. An independent IXP

would help facilitate fair and non-discriminatory access to/at the IXP.

Ensuring neutrality and independence will therefore be an important

consideration when determining the preferred implementation options for

the Omani IXP. In particular:

Location. If possible, the IXP should be based at a neutral location

(such as an existing data centre which is neither operated nor

owned by any of the ISPs, a Government building or a greenfield

site). If the IXP were to be hosted at an existing facility of one of

the licensees, there would be a need to ensure fair and non-

discriminatory access for all parties to the facility, as well as a need

for a clear separation between hosting functions and operating

decision.

Ownership. There are several ownership models which would

allow for an independent IXP. For example, the IXP could be set up

as an industry joint venture, owned by a neutral third party (such

23


as an international IXP operator) or the Government. The different

ownership models, including the key advantages and disadvantages

of each potential model, are set out in Section 4 below.

Management. In the case of separation between the ownership

and management of the IXP, it is important to ensure that the IXP

is operated by an independent party. For example, a potential

option would be to outsource the management to an international

IXP company.22 As well as ensuring independence in operations,

this approach allows a local IXP to build on the experience of the

international IXP company.

Operational rules. As set out above, a key function of the IXP is

to allow open, fair and non-discriminatory access to its facilities

and any parties hosted at the IXP. An independent management

structure should have the incentives to develop such an operational

environment.

An additional benefit to contracting with a respected, neutral operator to

manage the IXP is that such an operator is more likely to attract

international content providers, as they have existing business

relationships with these contacts.

Promoting the Omani IXP as a regional hub

IXPs generally grow organically over time at a speed that is dependent on

a number of factors (such as, amongst others, the local market dynamics

and ability to attract international players). Some of the largest benefits of

an IXP are achieved if an IXP reaches a sufficient size to be considered a

regional hub for Internet traffic. As its name suggests, a regional IXP

attracts international content and connectivity providers, and it

interconnects traffic from other IXPs in the region. The Authority

recognises that there are already a number of established IXPs in the

region, such as UAE-IX, SmartHubIX and BIX. A regional IXP is likely to

experience network effects in that the IXP becomes more valuable as

22 This is, for example, the approach taken by the UAE-IX. At the time, the TRA UAE

chose Germany’s biggest Internet exchange operator, DE-CIX, as a strategic partner. UAE-IX is further hosted at two data centres in Dubai. One of these is operated/owned by Equinix, a global provider of data centres, many of which host IXPs.

24


more parties use it. Therefore, the Authority considers there to be a likely

benefit for national ISPs and international players to be present at the

same IXP in the region. This suggests there is a role for a limited number

of regional IXPs. These regional IXPs would benefit from the international

traffic that interconnects via it, with other smaller IXPs in the region

connecting to it. As such, the Authority considers there to be a potential

first mover advantage, where the first IXP in the region to become a

regional hub may develop into and remain the only regional hub. For

example, content providers may wish to locate there as opposed to other

(and possibly smaller) IXPs in the region.

Ensuring the timely establishment of the IXP (without compromising its

overall set-up that would enable it to become a regional hub) would

reduce the prevailing risk that another IXP in the region establishes itself

as the regional hub in the meantime.

3.3.3 Key requirements

Further to the enablers discussed above, there are a range of important

(regulatory related) considerations that may need to be addressed prior to

the establishment of an Omani IXP.

Universal participation in the Omani IXP

The Authority is aware that the commercial incentives to participate in an

independent IXP are likely to vary across the ISPs. Therefore, there is a

risk that, under a “voluntary” market-led regime, not all ISPs may choose

to locate at, or otherwise participate in, the IXP. However, given the

overall market size and structure, it will be essential for all ISPs to

participate in the Omani IXP.

Notwithstanding the above, the Authority expects that all existing ISPs will

locate voluntarily at the IXP and interconnect with other parties (including

other ISPs) at the IXP. However, given the benefits that the IXP is

expected to deliver to the overall Internet market and beyond, the

Authority would avail of its existing powers to incentise or, if necessary,

mandate participation by those ISPs that are necessary for the IXP to

function productively.

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Licence requirements for the IXP

Art. (21) of the Telecommunications Regulatory Act (the “Act”) establishes

a licensing framework for the provision of electronic communications

services and/or networks. The question as to whether, and if so, how the

establishment and operation of the IXP will be licenced under Art. (21) will

be an important consideration in the process under consultation. For

example, this question will ultimately determine the applicability of a

number of important provisions that apply under the current regulatory

(including licensing) framework.

Art. (21)1 of the Act requires that a Class 1 licence be granted for any of

the following activities: (1) the establishment or operation of a “public

telecommunications network”; (2)the establishment or operation of

“international telecommunications infrastructure”; (3) the offering of

“public telecommunications services”; or (4)the offering of “international

access services”.23

The final decision on the specific IXP model to be adopted is yet to be

taken, so the exact scope of activities of the IXP (and, ultimately, the IXP

provider) has not yet been decided upon. Notwithstanding this, it is

possible that such activities could be determined to fall within any one (or

more) of the categories referred to under Art. (21)1 of the Law, and thus

require a licence.

Considering the clear benefits that the establishment of an IXP can bring

to the market, and in light of the strong support already expressed in

respect of this initiative, the Authority acknowledges the importance of

minimising any regulatory burden that would apply in respect of the IXP.

The Authority is mindful of the risk posed to the initiative under

consultation by the imposition of onerous and unnecessary regulatory

(including licensing) requirements on potential participants in the IXP. The

Authority also acknowledges the importance of ensuring that the

23 Art. (21)2 requires that a Class 2 licence be granted for the provision of public telecommunications services by operatory “that depend on […] the capacity of the telecommunications network of a Class 1 licensee” and for the provision of

“additional public telecommunications services” as defined under Art. (1)12 of the Act. Art. 21(3) requires that a Class 3 licence be granted for the establishment or operation of a private telecommunications network.

26


regulatory environment facilitates, to the best extent possible, the

development and success of this project, and the delivery of the

associated benefits to the Omani market.

Notwithstanding this, the Authority also recognises the importance of

ensuring that the required minimum regulatory safeguards are in place to

ensure the effective establishment and functioning of the IXP. An

important consideration here, for example, could be ensuring the security

of the traffic that will be exchanged at the IXP, or the fairness of the terms

and conditions under which services are provided by the IXP provider to its

participants. The Authority has a number of tools and levers at its disposal

to achieve the level of regulatory oversight required in this respect, while

also ensuring that the IXP provider is not subject to onerous and

unnecessary regulatory (including licensing) requirements if these are not

necessary as a matter of law or policy and would impact negatively on the

establishment and development of the IXP.

Reducing perceived barriers for international players to locate in

Oman

Attracting international players to Oman – transit providers, international

content providers and CDNs – will be an important factor in ensuring the

success of the Omani IXP. However, and as noted immediately above, Art.

(21) of the Act establishes a licensing framework for the electronic

communications sector that will also apply in respect of such international

players if they undertake any of the activities referred to in that provision

(this could include a Class 1, 2 or 3 licence activity).

While the Class 1 ISPs and local content providers that will participate in

the IXP will already be subject to the Omani telecommunications licensing

regime, the international players wishing to participate in the IXP will not

be licenced under Omani law, unless they are already present and

providing services in the market.

The requirement to apply for and obtain a licence pursuant to Chapter 3 of

the Act may, in itself, constitute a procedural impediment to an

international player wishing to participate in the Omani IXP. The

application of the licensing requirements themselves, and/or the various

regulatory requirements that will apply in respect of the particular class of

27


licence granted, is likely to constitute a serious consideration for the

international player when considering participation in the Omani IXP. It is

possible, however, that certain types of commercial arrangements

between international service providers and existing licensees could

potentially lie outside the scope of any such licensing requirements if the

arrangements are crafted to fall beneath the umbrella of an existing

licensee’s authorization (for example, by means of an agency or similar

agreement).

The Authority is mindful of the importance of the local licensing rules and

requirements on the decision of an international player to participate in

the Omani IXP, and the possible constraint that this could have on the

development and success of this initiative. On the other hand, the

Authority is equally mindful of the importance of ensuring balanced

regulatory oversight in respect of the activities of any electronic

communications networks/service providers operating in Oman,

irrespective of their country of origin.

The Authority further notes that international players wishing to locate at

the Omani IXP will need to acquire national connectivity services from

eligible licensees. This is likely to require gaining access to an existing

landing station and acquiring leased line capacity from that landing station

to the IXP facility. The Authority does not foresee this to be of concern as

these services form part of the draft Access and Interconnection

regulation.

Question

1. Do you agree with the Authority’s assessment of the key enablers and

requirements for a successful launch of an Omani IXP? Are there any

further enablers or requirements which the Authority should be aware

of? Please provide a clear justification for your response and a clear

description of any additional enables or requirements.

2. In your views, what, if any, are the key regulatory measures the TRA or

government should consider to facilite a successful launch of an Omani

IXP? As part of your response please provide a clear description of the

relevant regulatory measures and a clear reasoning why you consider

them to be important.

29

Public Consultation IXP implementation options

4 IXP implementation options

This section sets out how the Authority intends to support the

establishment of an Omani IXP, in terms of the ownership structure,

operational and funding models for the IXP. This builds on the assessment

of the current market environment, potential demand for a local IXP and

key objectives for it – as discussed in more detail in the previous sections.

The Authority first sets out the governance options considered, followed by

an overview of its preliminary conclusions on the preferred approach for

the Omani IXP, based on a set of evaluation criteria. The Authority then

discusses a range of further implementation considerations for the IXP.

4.1 IXP governance options considered

As part of its assessment to date, the Authority has reviewed five potential

ownership and operational models for the Omani IXP. These options range

from a market-led approach with a limited role for the Authority, to an

option where the Authority or Government owns and operates the IXP (at

least initially). Each option has its own advantages and disadvantages.

The Authority notes that the options below are not mutually exclusive, and

that some of these options could be combined together to a certain

extent. For example, the decision to outsource the operation of the IXP

could be combined with a multi-stakeholder ownership model or with a

government ownership.

4.1.1 Option 1: Market-led approach

Under this option, rather than initiating the IXP, the Authority would wait

until the market determines that an IXP is favourable and sets up an IXP

without any intervention on the part of the Authority, other than through

the grant of any necessary licence. This is commonly how IXPs have

emerged across Europe and the USA.

This option provides a market-led solution and is non-interventionist. The

ability of the market itself to deliver an IXP will also have the effect of

lessening the regulatory burden that may apply on the ISPs and other

30


stakeholders under a more interventionist option. It also reflects the

mixed views of ISPs on the business need for an IXP, given the current

level of domestic traffic and the recent interconnection agreement

between Omantel and Ooredoo.

However, in the Authority’s view, there is a very high probability that this

option may not result in the establishment of an IXP in Oman in the near

future. This means there is a significant risk that the expected benefits of

the Omani IXP outlined in Section 3.2 above would not be achieved.

In particular, the Authority is concerned that this approach would not

facilitate market entry by further ISPs in the near term. The absence of a

neutral platform for peering at a single location increases the costs for a

new ISP to enter the market. A continuation of the status quo is likely to

favour Omantel relative to other ISPs, given its current position in the

market.

4.1.2 Option 2: Multi-stakeholder owned IXP

This is a common approach in Europe (i.e. as an outcome of a market-led

IXP set-up), where the IXP is jointly owned and run by the parties

participating in it.

This option is likely to be closely aligned to market needs, given that

stakeholders are involved in the implementation of the IXP. It further

resembles a market-led approach, but with regulatory support to underpin

the initial set-up of the IXP. As such, it is likely to be most responsive to

stakeholders' needs as they have influence over what happens at the IXP.

An IXP that is responsive to stakeholder needs is likely to get better

engagement, which will help it be more successful. This option also offers

low set-up and running costs, which the Authority expects to be attractive

to stakeholders.

This option should be compatible with attracting external players to the

IXP. The independence and engagement of ISPs and other parties in Oman

will encourage international players to consider locating at the IXP.

Related to this, this option is compatible with most successful Internet

governance models.

31


This option would keep the operation of the IXP within Oman, which would

allow for the development of local IXP expertise within the Omani Internet

sector. It would also be scalable in case of further market entry.

Once the IXP is established, the Authority would not be involved in the

operation of the IXP, although it may consider taking an oversight role in

the governance of the IXP.

However, this option may not be viable, given the current market

structure in Oman. In particular, it is not clear that stakeholders would co-

operate, as their interests may not be aligned. In European countries

where this model has been successful, the Internet market has tended to

be less concentrated, with multiple ISPs. In such cases, the market itself

has often delivered this model in the absence of (or with limited)

regulatory intervention. Further, there is limited precedent for this type of

ownership and operational model in Oman. Therefore, questions remain

about whether this is compatible with the state of the market.

4.1.3 Option 3: Independent IXP provider

Under this option, an independent, (national) third party operator would

own and operate the IXP.

Similar to Option 2 above, in the Authority’s view, this model should also

facilitate attracting external players. The independence and engagement

of ISPs and other parties in Oman will encourage international players to

consider locating at the IXP. It would also be scalable in the case of

further market entry.

There would again be a limited role for the Authority, with it only taking an

oversight role in the governance of the IXP (if at all), once the IXP is

established.

However, the Authority is aware that there may be limited suitable

candidates for the IXP provider role. In particular, the Authority is

concerned that there may be limited candidates within Oman that might

be considered by all stakeholders to be sufficiently independent from

existing ISPs.

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Under this option, the IXP provider would require remuneration to operate

the Omani IXP beyond those anticipated under a multi-stakeholder owned

IXP or a government owned IXP. These would be funded by fees from the

IXP members. This would be the case under both a for-profit and not-for-

profit business model, although the level of fees is likely to differ under

each.

4.1.4 Option 4: Outsourcing model

Under this approach, the running of the IXP would be outsourced to an

established, international IXP provider, as being the case at, for example,

the UAE-IX. The outsourcing partner would be responsible for the day-to-

day operation of the IXP. This approach could be used with a variety of

ownership and governance models. In particular, the IXP could be

industry-owned (i.e. option 2 above) or government-owned (option 5

below).

There may be the option to seek an international operator to establish and

run the IXP; however, it is not clear if such an opportunity would be of

commercial interest to these providers.

Under this option, the IXP provider will provide expertise and industry

contacts which would support the IXP. This would ensure the diligent and

effective operation of the IXP. However, the flip side of this is that no local

IXP expertise is developed. By outsourcing operations to an international

operator, IXP knowledge is unlikely to develop within Oman in the future.

The Authority is therefore concerned that this approach could hinder plans

to grow and enhance the IXP, or even develop other IXPs in the future.

This option, however, may help attract external players to the IXP as the

provider is likely to have a strong international reputation. But there is a

risk that the IXP may not fully deliver the objectives of the Authority and

other stakeholders, as its objectives may not be aligned with the

Authority’s objectives and those of other stakeholders. As such, it may

have limited incentives for the IXP to develop, unless it has been

contracted through an incentive-based contract which rewards it for

developing the IXP as measured by a number of carefully decided metrics,

aligned with the Authority’s objectives.

33


Further, this is again a higher cost option when compared to the multi-

stakeholder owned IXP or a government owned IXP. This is because the

IXP provider would require remuneration to operate the Omani IXP, which

would need to be funded by charges levied on those located at the IXP.

This would be the case under both a for-profit and not-for-profit business

model for the exchange itself, although the level of fees is likely to differ

under each.

Outsourcing is an operational model and so can be combined with other

ownership models, such as the multi-stakeholder approach or TRA

ownership.

4.1.5 Option 5: Government owned and operated

Under this option, the IXP would be set-up and run (at least initially) by

the Government. This approach has been adopted, for example, in Egypt.

This option would provide the Government with control on set-up and

operational decisions. It would also ensure all operators have fair and non-

discriminatory access to the IXP. However, this option would require

significant involvement from the Government in all aspects of running the

IXP. This could be reduced to some extent if operations were outsourced,

as under Option 4 above, and the Government only retained ownership.

This option would keep the operation of the IXP within Oman, which would

allow local IXP expertise to build up within the Omani Internet sector.

This option is also susceptible to being detached from market

developments and market players’ needs. A Government-owned and

operated IXP is less likely to be responsive to the market’s needs, and

could be slow to innovate and develop. It is also likely to be seen as an

unfavourable model by international players, since it is not compatible

with most successful Internet governance models.

4.2 Preliminary conclusions on the preferred IXP

implementation options

To determine the most suitable option for the Omani IXP, the Authority

has assessed each model against the range of evaluation criteria set out in

the table below. The combination of these criteria provides an indication of

34


how successful the implementation of an Omani IXP would be under each

option.

Criteria Explanation

Contribution to the

Authority’s objectives

Assesses the IXP options on how likely they are to contribute

to the Authority’s objectives through successful implementation

and attracting parties to the IXP.

Attractive to ISPs (current

and prospective)

Assesses how attractive each option is to the ISPs. This

includes the two existing ISPs (Omantel and Ooredoo),

prospective new ISPs in the Omani market, and also

international ISPs. As discussed above, the interests of these

ISPs will be different, and our assessment attempts to account

for this.

Attractive to international

players

Assesses how attractive each option is to international players,

such as international content providers and transit carriers.

Role for TRA / regulatory

intervention

Assesses the need for regulatory oversight and involvement

from the Authority in establishing and operating an IXP.

Cost Assesses the cost of each option in terms of establishing and

operating the IXP. It considers the direct cost of the IXP, rather

than indirect costs to the market or operators.

Develop IXP knowledge Assesses how successful each option is at developing IXP

knowledge within Oman. This knowledge will help scale the

IXP in the future, and also increase the expertise within the

Omani Internet sector as whole.

Regional / international

precedent

Assesses each of the options in terms of regional and

international precedent. The more precedent, the more

confidence that a particular option is a feasible option

Compatible with market

structure / environment

Assesses the practical consideration of how well suited the

current market structure or environment is to each option.

4.3 Further implementation considerations

Below, the Authority sets out a range of further factors which it considers

are important for the successful implementation of the IXP in Oman. The

Authority notes that further consideration will need to be given to the

below matters, once the ownership and operational model of the IXP is

determined. In particular, under a number of the ownership models

discussed above, the final decision on the below matters will rest with the

IXP provider. As such, the below views should be considered preliminary

and as recommendations only.

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4.3.1 Recommended location of the IXP

The Authority considers a neutral location and practical considerations to

be the two key criteria when deciding the location for the IXP.24

The final decision on where to locate the IXP will be taken by the IXP

operator. However, most successful IXPs are hosted in data centres. Data

centres offer a number of technical characteristics essential for reliable IT

operations. This includes secure data backup and storage facilities,

redundant power supplies, qualified staff for engineering and network

operations, and physical security and controlled access.

Based on the Authority’s initial assessment of the potential options,25 it is

recommended that the IXP be at least initially located at an existing data

centre owned by a neutral party, with the Oman Data Park (“ODP”)

currently representing the only viable option at this point in time.26

From a practical perspective, the ODP would be a good choice for the

location of the IXP. It would be a cost-effective solution, has the required

capacity in terms of fibre and other specifications, and the operator

appears to be willing to host the IXP. Further, as part of the stakeholder

meetings, the ODP has confirmed its interest in hosting the IXP, and has

subsequently provided an indicative fee quotation for providing the hosting

and ancillary services to the IXP. However, given the ODP’s ownership

24 For example, locating the IXP at an existing data centre is a more cost-effective solution than building a new data centre for the IXP.

25 The key location options considered by the Authority include: (i) a new site where a data centre for the IXP could be constructed; (ii) an existing data centre owned by a party that does not operate in the telecommunications market - for example, the Omani Central Bank or the ITA; (iii) a data centre which may have links to telecommunications operators (i.e., the Omani Data Park); and (iv) a telecommunications operator-owned and operated data centre.

26 Whilst locating at a new site or an existing data centre owned by a party outside the telecommunications sector (such as the Omani Central Bank) would provide the most neutral locations, neither of these two options appear feasible at this point. In particular, a locating an IXP at a new site would involve constructing a new data centre which would not be a cost-effective solution in the short-term given the initial size of the IXP. Further, indications from stakeholder engagement suggest that such parties outside of the sector would be unwilling to host the IXP. For example, the Omani Central Bank requires a high-level of security, which it would not wish to compromise by hosting the IXP. The Authority further understands that the ITA is planning to build a data centre. However, it is unlikely that this would be operational for at least two to three years.

36


structure,27 the Authority understands that other ISPs and parties would

likely require strong safeguards in the form of governance and regulation

to ensure the independence of the IXP. Interviews with stakeholders

suggest that they would be willing to consider the IXP locating at the ODP,

providing sufficient safeguards are put in place. These safeguards would

include, but are not limited to: (i) ensuring fair, non-discriminatory access

to/at the data centre; (ii) prevention of cross-subsidies or pricing regimes

which favour one operator over another; (iii) effective and rapid action on

anti-competitive practices by the data centre owner; (iv) a robust

complaints handling process; and (v) assurances of commercial

confidentiality.

Once the IXP has grown in the medium to long term, re-locating the IXP to

an alternative location should be considered. Options would include:

the new ITA data centre, assuming it is operational by then and

willing to host the IXP; or

a data centre at a new location, potentially a purpose-built facility.

This would provide neutrality and more space to host the growing IXP. At

this stage, the Omani IXP may also consider a second site to provide

additional redundancy so that the ODP data centre would no longer

present a “Single Point of Failure”.

4.3.2 Recommended funding model

In line with common approaches elsewhere, the Authority would expect

the IXP to be funded through contributions of its members and/or parties

locating at the IXP. The IXP could, for example, charge a combination of

one-off joining fees to cover set-up costs and recurring charges to cover

running costs. However, the final decision on the preferred fee structure

will made by the IXP operator as part of its detailed business planning

process. Further, The Authority considers there to be two main business

27 The ODP is a joint venture between Omantel and 4Trust LLC. Whilst Omantel does not directly operate ODP, there is clearly a strong association between the two entities.

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models for an IXP that are of relevance in the Omani context. These are

set out and discussed below.

Not-for-profit IXP. One option is to run the IXP as a not-for-profit

organisation, sometimes mutually owned by the ISPs who use the

IXP. Here, the IXP aims to be revenue-neutral from year to year.

Since they are not driven by the usual business considerations of

making a return on investment, these IXPs can and do take a

broader view of their responsibilities. This approach has often been

adopted by European IXPs.

Commercially operated IXP. The second model is to operate the

IXP along straightforward commercial principles. The exchange

isrun as a for-profit business, which generates returns for its

investors. This tends to be the approach taken by US-based IXPs,

and some of these companies operate globally on this basis. One of

these companies would already be operating in Oman if they felt

there was a reasonable prospect of getting enough business from

ISPs and hosting companies in the region, and if it felt it could

make the venture profitable enough.

The Authority would expect the IXP to operate as a not-for-profit entity.

This would allow it to keep its overall funding requirements lower than

under a commercially operated IXP (which would seek a return beyond

that of a not-for-profit entity).28 It is also in line with European precedent.

However, the Authority recognises that this will, in part, depend on the

ownership structure of the IXP, with some ownership models (such as, a

third party IXP provider) likely to favour a commercially operated IXP.

4.3.3 Proposed implementation

Again, the final decision on the set-up and implementation of the IXP will

be made by the IXP operator. However, in line with experiences

elsewhere, the Authority would expect the Omani IXP to grow organically

28 Based on an initial high-level assessment of the technical specifications and equipment costs, the Authority expects the likely funding requirements for a not-for-profit based IXP to be limited (i.e., the IXP is expected to require approximately USD 500,000 per year, on average, over the initial five years).

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over time. In particular, IXPs usually begin with a domestic focus with the

aim of peering national traffic locally rather than “tromboning”. Over time

if the IXP develops successfully, international players may be attracted.

In case of a phased implementation of the IXP, there would be modest

equipment needs for the IXP provider initially.29 This, in turn, would allow

it to keep its initial funding requirement low, making it more attractive for

parties to locate at the IXP.

Questions

1. Do you agree with the set of IXP governance models evaluated by

the Authority and the set of evaluation criteria used? If not, which

alternative governance models and/or evaluation criteria should the

Authority consider? As part of your response, please provide clear

reasons and rationale for your position and details on the

alternative models and/or evaluation criteria you recommend the

Authority to consider.

2. If not, please set out why you believe another model may be more

appropriate and provide details of the alternative model you would

favour.In your view, what is the preferred governance model for an

Omani IXP? As part of your response, please provide clear reasons

and rationale for your position and details on your preferred IXP

model.

3. Do you agree with the Authority’s preliminary conclusion on the

recommended location of an Omani IXP? If not, please set out why

you believe another location may be more appropriate and provide

details of that alternative location you would favour.

4. Do you agree with the Authority’s preliminary conclusion on the

proposed funding model for the Omani IXP? If not, please set out

29 If located at an existing data centre, the IXP provider would rent space in the data centre and purchase ancillary services (such as, power and air-conditioning) from it. It would further need to deploy its own basic infrastructure (such as, a switch, servers and software) and employ limited staff. Note that the technical specifications are likely to be independent of the chosen ownership structure, but will depend in part on whether it is located at an existing data centre.

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why you believe another funding model may be more appropriate

and provide details of the alternative model you would favour.

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