Session II: IXP Business Strategy

1. Session II:IXP Business Strategy Business and Sustainability Model

2. Session Objective • The success of the IXP is dependent on its ability to grow, provide a reliable and dependable service and attract new membership. • The business plan and sustainability model are therefore important for the IXP to raise revenues to meet its operational obligations. • It is the responsibility of the stakeholders to agree on a suitable business model for the IXP • Therefore it is this session’s objective to develop a business plan for the sustainability of the proposed IXP

3. IXP Mission and Vision “To efficiently exchange and grow local and regional traffic to the benefit of our community and serve as a catalyst for growth by providing an efficient, reliable and robust critical Internet infrastructure.”

4. Recap: The Opportunities • Local hosting and content development e.g Google Cache model • Approach the existing content providers like the online newspaper company and suggest that they consider local hosting as an option. • Develop the hosting products • Reviewing the current hosting solutions and products available • Working in partnership with local web developers • e-Government Services • Building carrier neutral datacenters • Relevant local content • Develop local language content for e-learning, e-government services, IPTV and Software solutions. • Regional interconnection - peering and transit opportunities. • Voice Over IP Services

5. BUSINESS POLICY CONSIDERATIONS

6. IXP Peering and Interconnection Policies • Open peering Policy • Develop an open peering policy to encourage non-traditional members such as CDNs, Government, Academia, Banks, etc to peer • Initiate Strategies to grow membership – marketing, public seminars, “tell the story why is this a good business • Regional Interconnection Policy • Encourage members to exploit the cross-border interconnection opportunities by negotiating fair contracts with Infrastructure Operators and International bandwidth providers. • Assist operators and members take advantage of regional Interconnection opportunities and become Regional carriers • Transit Policy • The ability to attract carriers and transit providers at an IXP is important to grow the value and traffic at an IXP. • This policy is subject to national regulations on Internet transit.

7. IXP Peering Agreements • A Peering agreement is applicable to all members who choose to peer an IXP. • There are three main peering agreements implemented by IXPs • Bilateral Peering (BLPA) • This agreement requires every member to have a bilateral agreement with each member at the IXP. • It is commonly found in most developed IXPs due to the right of refusal, to peer granted to each member, to peer with any member for commercial purposes • Multi-lateral Peering (MLPA) • This agreement requires every member to peer multi-laterally with every member at an IXP. The agreement is not often enforced. • The MLPA is useful in trying to grow peering value at an IXP • A Mandatory version of this agreement (MMLPA) is commonly found in startup IXP in developing worlds due to its ability to force incumbents to peer with others at the IXP. MMLPA is enforced using a Route-Server IXP Topology • Hybrid Peering Agreement (HPA) • This agreement supports both the BLPA and MLPA. • Eliminates the need for a competing IXP in the same location to serve unsupported policy. • A Route-Server is often used for MLPA members.

8. Innovation Catalyst • The IX serves as a catalyst for innovation of new products and services for the local community. • Therefore stakeholders should promote initiatives that encourage local innovation of content and application development • Implement monitoring tools to provide traffic stats for the benefit of members and measurement of growth over period of time for researcher

9. Capacity Building Activities • Members to understand economics of Peering and Transit, the IXP value curve and value of peering. • Neutralizing the asymmetry of information between members and the rest of the world. • Facilitate the development of a pool of skilled peering coordinators and network routing engineers. • Ensuring that the IXP and the members operate stable and robust network infrastructure services based on best practices.

10. BUSINESS MODELS OPTIONS

11. Option 1: Free IXP • The Uganda IXP (UIXP) and Seattle IXP are good examples of IXPs modeled on the Free business model • The IXP location is donated or paid for by a willing sponsor. • No membership, joining or monthly fees are charged to IXP participants • Members contribute (donate) equipment, money, human resource and time to the IXP based on their ability and the needs

12. Option 1: Free IXP … (cont’d) • Pros; • Low cost of peering for members with no additional costs other than capacity to IXP • Low operating costs for the IXP organization • Volunteer driven; less complexity on organizational structures and management • Cons; • Difficult to scale growth when largely dependent on donations and contributions. • Inconsistencies and inefficiencies can arise when dealing with volunteers • Neutrality concerns can arise where one member is the largest contributor

13. Option 2: Subsidized Business Model • The Nigeria IXP (IXPN) and Malaysia IXPs are good examples of IXPs modeled on the subsidized business model • Certain aspects and operational costs of the IXP are met by a sponsor for a sustained period of time. • In most cases the Governments through development fund subsidize the IXP operating costs • The IXP meets some of the operating costs by charging members a nominal fee.

14. Option 2: Subsidized Business Model …. (cont’d) • Pros • Low-medium cost of peering for members in addition to the cost of leasing capacity to the IXP • Sustained revenue to meet operational expenses • Easy to scale and grow due to ability to implement and maintain management/operational structures • Cons • Uncertain future should subsidies be withdrawn or main sponsorship lost • Neutrality or fear of capture/control by main sponsor • Increased commitment for members on Governance aspects and reporting to sponsor • Complex operational structures and management

15. Option 3: Independent Business Model • The Kenya IXP and Johannesburg IXP are good examples of IXPs modeled on the independent business model. Most developed IXPs in Europe have an independent business model. • All aspects and operational expenses of the are met by the IXP. • The IXPs generate revenue by charging fees for the services provided on a monthly, quarterly, bi-annually. • Additional revenues from value added services, one-time fees, etc

16. Option 3: Independent Business Model • Pros • Neutrality of the IXP is guaranteed in a self-sustained model • Sustained revenue to meet operational expenses • Easy to scale and grow due to ability to implement and maintain management/operational structures • Cons • Medium-high cost of peering for members in addition to the cost of leasing capacity to the IXP • Increased commitments for members on Governance issues and reporting • Medium-Complex operational structures and management

17. OPEN DISCUSSIONS

18. Discussion Questions • What are the stakeholder’s perceived mission and vision of the IXP ? • What are the opportunities that the stakeholders envision for the IXP growth in the country? • Are there any legal or regulatory challenges that need to be addressed in order to consider or pursue some of the opportunities proposed earlier in the presentation

19. Discussion Questions • What peering and interconnection policies are the stakeholders keen to introduce at the IXP from the onset and why • Are there any regulatory limitations to adopting the peering policies • Are there any other business policies and strategies that members would want to consider and adopt for the new IXP

20. Discussion Questions • There are 3 possible IXP peering agreements, • Bilateral Peering Agreement (BLPA) • Multi-lateral Peering Agreement (MLPA or M-MLPA) • Hybrid Peering Agreement (HPA) • Which one is the most appealing to the stakeholders and why?

21. Discussion Questions • There are 3 potential business models for an IXP. Which business model would the stakeholders wish to adopt for their new local IXP and why? • Free IXP business model • Subsidized IXP business model • Independent IXP business model • What solutions do you propose to address some of the challenges for the model chosen i.e what are the fees to be charged in an independent IXP model?

22. Acknowledgement and Attribution This presentation contains content and information originally developed and maintained by the following organisation(s) and provided for the African Union AXIS Project http://www.internetsociety.org

23. SESSION II: END