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

2. AFIX Technical Workshop: Session 7 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

3. AFIX Technical Workshop: Session 7 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

4. AFIX Technical Workshop: Session 7 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!

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

6. AFIX Technical Workshop: Session 7 Co-operative or 3 rd party? 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 3 rd 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 Whichever option is chosen: Who manages the IXP and on what terms?

7. AFIX Technical Workshop: Session 7 What kind of business entity? Answer depends on choice of co-op / 3 rd 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

8. AFIX Technical Workshop: Session 7 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

9. AFIX Technical Workshop: Session 7 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?

10. AFIX Technical Workshop: Session 7 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?

11. AFIX Technical Workshop: Session 7 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

12. AFIX Technical Workshop: Session 7 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?

13. AFIX Technical Workshop: Session 7 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

14. AFIX Technical Workshop: Session 7 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.

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

16. AFIX Technical Workshop: Session 7 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!

17. AFIX Technical Workshop: Session 7 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

18. AFIX Technical Workshop: Session 7 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

19. AFIX Technical Workshop: Session 7 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.

20. AFIX Technical Workshop: Session 7 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!

21. AFIX Technical Workshop: Session 7 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?