Monday, November 7, 2011

OECD report: Internet Traffic Exchange Points

[Here is an excellent report on IXPs recently released by the OECD.
One of the newsworthy highlights is the dramatic reduction in telecommunication costs due to an open competitive market in the Internet versus the still largely monopolistic telco/cableco markets. It is interesting to note that Internet costs continue to drop while the monopolistic last mile broadband market rises. Competition works – and this is ample evidence why governments and regulators need to break open last mile market to competition through structural separation or investing in the underlying infrastructure as in Australia or Singapore.
It is good to see the OECD recognize the importance of IXPs as one of the linchpins of the Internet economy. I have long argued that IXPs are going to play an increasing important role in the future of the Internet. See my paper on this subject ( On some networks 90% of the Internet traffic is sourced across IXPs via settlement free content peering. IXPs deep into the community will be critically more important with 4G and 5G networks , as proximity to an IXP significantly affects Internet performance and throughput on wireless networks. See article below on how content networks face ‘hyperconnected’ world of devices.

I believe that R&E networks and other organizations such as registries can play a critical role in ensuring the deeper deployment of IXPs especially in communities where there is little business case for a commercial operation. IXPs quickly become a nucleus point for small business and other commercial activities within a community, and this is how R&E networks can play such an important role. R&E networks in New Zealand, Norway and British Columbia are good examples in this regard by building transit or internet exchange points in communities through the regions they serve. The Brazil IXP community, as discussed in the OECD paper is also another good example to look at.

Some excerpts from the OECD paper – BSA]


The reasons behind the very good performance of the Internet market model of traffic exchange are explored in the section entitled “Why Has the Internet Market Performed So Well?” in the Annex to
this Report. The contrast between the results observed in the Internet market and comparable markets for exchange of traditional circuit-switched voice (time-domain multiplexed, or TDM) traffic is striking. For example, Internet transit service provides what is effectively, in TDM terms, global transport and termination. The price of USD 2 to USD 3 per megabit per month therefore includes a traffic-weighted average of transport costs to all the possible destinations in the world, as well as the costs of terminating on
local access networks in each country. Stated in terms of an equivalent per-minute price for delivery of voice traffic, this is less than USD 0.0000008, five orders of magnitude less than wholesale rates for services providing comparable functions in TDM markets. The reasons for this performance include the efficiency of packet-switched technology, competition in Internet markets, and the flexibility of routing arrangements among IP networks. The market has also benefitted from the policy environment, in which
governments have refrained, in most OECD countries, from regulation of the market for IP traffic exchange.

A survey of 142,000 peering agreements conducted for this report shows that the terms and conditions of the Internet interconnection model are so generally agreed upon that 99.5% of interconnection agreements are concluded without a written contract. That these “rules of the game” are so ubiquitous and serviceable indicates a degree of public unanimity that an external regulator would be hardpressed to create. The parties to these agreements include not only Internet backbone, access, and content distribution networks, but also universities, NGOs, branches of government, individuals, businesses and enterprises of all sorts—a universality of the constituents of the Internet that extends far beyond the reach
of any regulatory body’s influence.
New categories of participants have invested to improve quality and create new alternatives to transit. These include self-supply by online service and content providers such as Google, as well
as intermediary content delivery network (CDN) service providers such as Akamai and Limelight. CDN services have supported, and have grown in parallel with, the growing demand for applications such as video streaming and download. Taken together, many of the structural changes summarized here -- reduced reliance on transit, local availability of IXPs, direct delivery of traffic by CDNs, and caching of content closer to the user -- have all contributed to make routing more direct, reduce latency, and improve quality.
These developments have made the structure of the Internet flatter and broader, and reduced its dependence on any one player or group. Today, only a small percentage of the traffic on the Internet ever touches any of the old backbone networks. Google is now ranked third among networks in global traffic carried, behind only Level 3 and Global Crossing, and it’s notable that each of these largest networks are born of the Internet era, rather than evolved from incumbent TDM predecessors. In general, the growth of the Internet over the past five years has increased the effectiveness of competition in the market for Internet traffic exchange.

The growth of the Internet market in Latin America in the past five years has been dramatic, led by the success of a long-term program of new exchange point development by “Comitê Gestor da Internet
no Brasil” (CGI), the Brazilian Internet Steering Committee, a public-private partnership funded in large measure by revenue from domain name registrations within the .BR country-code top-level domain.
Between 2006 and 2011, Brazil has grown from four IXPs to nineteen, maintaining their position of leadership in the region; in addition to having the region’s largest exchange, in São Paulo, Brazil has hosted more than half of Latin America’s IXPs for most of the history of the Internet’s expansion in the region. Brazil’s success has been a product of several factors coinciding: the CGI takes the long view, with a consistent program of economic development, rather than short-term one-off projects. Their IXPs are among only a handful in the world that are the product of a considered and intentional economic model. Before beginning, they made a careful investigation of CityLink, the New Zealand IXP system, and of the
SeattleIX, including site visits, observation of the annual governance meeting, and interviews with the founders, board of directors, and Internet exchange participants. This feedback loop has continued to the present day, with CGI management staff and board members actively investigating the successes and
failure of other IXPs and participating in the international IXP operations community.

Akamai, CDNs face ‘hyperconnected’ world of devices
Device proliferation will only continue. In an era of “hyperconnected devices, any device that can be connected is connected,” said Akamai chief scientist Tom Leighton. Five years ago, Akamai delivered 3TB of mobile data per day, that number rose to 520TB per day this year, and is projected to hit 91,000TB (or 91 petabytes) per day by 2016.
Akamai and smaller CDN competitors like Limelight and Edgecast are scrambling to meet the demand for a great mobile computing experience. The scary thing is that smartphones and tablets are just the beginning. More non-PC devices including household appliances,even garments, will be part of the data scrum going forward. That means more data flowing from more types of devices with all sorts of form factors.
“These devices may be on Ethernet or WiFi or 3G or 4G. [They will be] Refrigerators other appliances. That’s a new challenge for [network] performance,” said Ravi Maira,VP of site acceleration for Akamai.
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