Business Aspects of Internet Exchanges

1. Business Aspects of Internet Exchanges AFIX Technical Workshop Session 7

2. Outline of Content • What makes a successful IXP? • Setting up an IXP: Key business decisions • Co-op or independent? • What kind of business entity? • Should the IXP offer additional services? • Who owns the assets? • Ensuring financial sustainability • Managing relationships: 90% of the work! • Case study: the Kenya IXP AFIX Technical Workshop: Session 7

3. What makes a successful IXP? • Neutrality • With respect to carriers, ISPs and co-location providers • Should never be perceived to serve interests of one stakeholder at the expense of others • IXP operated by ISP association or non-profit is ideal – but not always achievable • Robust and secure • Can scale in size • Financially sound and stable AFIX Technical Workshop: Session 7

4. The simplest model of all “A box in a cupboard under the stairs” • Cheap, easy and not to be scorned • The questions to follow still need answering! AFIX Technical Workshop: Session 7

5. Key business decisions • NB: There are no universal solutions: right choices depend on your circumstances! AFIX Technical Workshop: Session 7

6. Co-op can be cheaper and easier to manage NB to avoid “tragedy of the commons” – everyone wants to use it, no-one want to pay for maintaining it! Careful cost accounting is crucial 3rd party easiest for preserving neutrality For-profit operation is possible – but not desirable in a market with only one IXP Can be good option where govt / regulator must be involved Co-operative or 3rd party? • Whichever option is chosen: Who manages the IXP and on what terms? AFIX Technical Workshop: Session 7

7. What kind of business entity? • Answer depends on choice of co-op / 3rd party / other • What legal structures are available in your country? Aim for: • Easy and cheap to administer • Have sufficient status to deal with regulators & stakeholders • Be able to enter into legal agreements AFIX Technical Workshop: Session 7

8. What services to offer? • IXP by definition must offer shared switched infrastructure so members can exchange traffic • Other possibilities: • Route servers • Facilities for private interconnect agreements • Facilities to provide access to transit services • Hosting and other co-location services • Non-technical services eg lobbying & networking AFIX Technical Workshop: Session 7

9. Who owns the assets? • Many IXPs start out with borrowed or donated equipment – but clarity is still needed: • Who owns the physical infrastructure? • If not the IXP, what are the terms of use? • What happens if the owner merges with another company, is liquidated, withdraws from the IXP, etc? • Who is responsible for insuring and maintaining equipment? AFIX Technical Workshop: Session 7

10. Financial sustainability • IXP costs can include: • Premises • Power & utilities • Telecommunications • Salaries • Admin costs (legal & accounting fees, etc) • Equipment acquisition, maintenance & insurance • How much should members pay to participate? AFIX Technical Workshop: Session 7

11. Funding options 1 • Monthly / annual flat fee • Can be graded according to size of ISP • Easy to administer • Add a joining fee to cover set-up costs • Can lead to dispute if some members generate much more traffic than others AFIX Technical Workshop: Session 7

12. Funding options 2 • Sliding fees according to access bandwidth / traffic volume • Can be considered where there is conflict over volume of use • BUT requires IXP to monitor members’ traffic – compromised neutrality? AFIX Technical Workshop: Session 7

13. Funding options 3 • Fees according to services used • Only applicable if IXP offers additional services eg. hosting • Can be combined with flat fee OR sliding scale fee for basic IXP services AFIX Technical Workshop: Session 7

14. Between ISPs • Should ISPs pay each other for exchanging traffic? • Short answer: NO • Long answer: It’s impossible to monitor traffic end-to-end – ISPs are not telcos! Trying to do it = admin and technical nightmare. AFIX Technical Workshop: Session 7

15. Managing relationships • Stakeholders can include: • ISPs • Regulator • Government officials • Policy makers • Upstream transit providers • Telcos • 90% of the work ? AFIX Technical Workshop: Session 7

16. Case study: Kenya • 2000: No IXP in Africa between Morocco and South Africa • ISP services open to competition – but Telkom Kenya controlled underlying infrastructure • Telkom Kenya had exclusive right to operate a national backbone for purposes of carrying international traffic • All internet traffic in Kenya exchanged internationally – estimates that 30% of upstream traffic was to domestic destinations! AFIX Technical Workshop: Session 7

17. ISPs organise • Kenyan ISPs association (TESPOK) launched KIXP as neutral, non-profit IXP in November 2000 • Telkom Kenya complained to CCK that KIXP KIXP violated their exclusive right to carry international traffic • CCK concluded KIXP needed a licence and shut it down within two weeks AFIX Technical Workshop: Session 7

18. Impact of KIXP • During the two weeks of KIXP's operation: • Latency dropped from average 1,200- 2,000 milliseconds (via satellite) to 60-80 milliseconds (via KIXP). • Monthly bandwidth costs dropped: 64 kbit/s circuit: US$ 3,375 to US$ 200 512 kbit/s circuit: US$ 9,546 to US$ 650 AFIX Technical Workshop: Session 7

19. Fighting back • TESPOK argued: • KIXP was a closed user group & therefore legal under Kenya’s Telecommunications Act. • Local exchange of domestic Internet traffic did not contravene Telkom Kenya's monopoly as all international traffic would continue to flow over its links. • Telkom Kenya opposition fed by the fear of losing a significant portion of its international leased line revenues. AFIX Technical Workshop: Session 7

20. Victory – and a lesson • CCK licence granted November 2001 • Ruling: "An IXP is not an international gateway but a peering facility that enables ISPs to exchange local traffic“ • Lesson: NB to educate and have regulators on board from the start! AFIX Technical Workshop: Session 7

21. Discussion points • What kind of IXP would work best in your country? • What is the legal and regulatory position? • Are there any stakeholders likely to oppose an IXP? On what grounds? AFIX Technical Workshop: Session 7