Internet Exchanges

The infrastructure of the internet is made up of three elements: peering links, transit links, and nodes.

It's the interconnections that make the internet special. No other system on earth is as highly interconnected as the internet. How interconnected? That's hard to say for sure. The internet is so distributed that no one truly knows exactly how big it is.

There are tens of thousands of ISPs in the world. Each one must connect to the rest of the internet either through a node at another, larger ISP, or through an Internet Exchange Point (IXP) node. Many do both. There are thousands [1] of IXPs around the world, each serving as a node for tens to hundreds of ISP members.

ISPs link to each other firstly by buying transit from another, larger ISP. The transit that they purchase ensures that the client can ship data from their own customers to any other point on the internet. The large ISPs also purchase transit from even larger ISPs. Eventually, the largest ISPs share their data in a global backbone called the Default Free Zone.

Not all traffic needs to reach the DFZ though. If my own ISP and my destination share the same mid-level ISP, the traffic will be directed back down at that level. Thus, each ISP acts as a point of interconnection between all of their lower-level clients. Buying transit means that your data will reach its destination no matter which of those paths it needs to follow.

Peering is a different way to interconnect that is more limited. When ISPs peer, they exchange data only between their customers. Two ISP peers will connect together and when one of their customers emails to their competitors customer, they send the email directly across the peering link.

In a way, peering is a marriage of convenience. We are talking about competitors working together here. So why would anyone do that? They simply wish to save money. Transit is expensive and there's a meter on the line. Any data that an ISP can divert through a peering link to a competitor is a substantial savings on their transit bill.

Peering can be seen as a virtuous cycle. By working together, competing ISPs can actually grow their overall strength because of the cost effeciencies they realize.

Internet Exchange Points (IXPs) are the facilities where peering takes place. They are usually set up as non-profits with strict rules that only peering (no transit) can take place at the IXP. This is done to protect the fragile relationship between competitors. The IXP is strictly for mutual gain.

The actual equipment at an IXP is simple and inexpensive to start up. All that is required is a simple network switch. The human element is much more challenging to arrange.

The reason why IXPs are so popular is that they build up the local internet. As long as the nearest nodes are far away they will be expensive and slow to use. Although data travels across the internet very quickly, delays can occur when the closest node is very far away. Information usually needs to travel to the node and back before it can reach its destination. With a local IXP, the data travels far less distance.

In addition, IXPs help to increase the power of capital that is spent on internet infrastructure. With a distant node, usually payments must be made to a long-distance transit provider to reach the node. Traffic that will end up locally must be paid for twice (to the node and back). Starting a local node eliminates those payments.

Building nodes is the core activity of building the internet. This effort continues today all over the world. Even in places where the internet is also strong, nodes are build to bring additional efficiency. In new areas, the first node is the first step towards a strong local internet.

Before local nodes exists, local internet users rely heavily on outside transit providers to connect them up to the rest of the internet and to each other. With the advent of local nodes, they need no longer pay as much to the transit providers. There is more incentive to create services that are hosted locally and connected to the IXP.

These locally hosted services can completely circumvent payments to transit providers if they and their customers connect directly to the local node. Since both the service and users are peered at the IXP, none of the data ever reaches the expensive long-distance transit lines. Thus it is possible to pull a new business up by the bootstraps at a very low cost of deployment. These savings can be used for business development instead of paying large multinational companies.

As the local internet grows, the presence of valuable local services connected to the IXP will inevitably draw the internet of foreign users. They will pay the transit companies to connect to you. This is a gradual shift, but one that was seen most dramatically in Asia with the establishment of IXPs throughout the late nineties in an effort to cut their dependence on foreign providers. The internet traffic that an IXP can aggregate, the more powerfully it appears on the global stage.

When users in remote parts of the internet show a growing desire to access services that are local, the result is that the flow of traffic in and out of the area becomes more balanced. This gives local purchasers of transit more leverage in negotiating rates. In Asia there has been success in shifting some of those paid transit links all the way to free peering links.

[1] Hyun, Broido, claffy. On Third-party Addresses in Traceroute Paths. http://citeseer.nj.nec.com/hyun03thirdparty.html