1. Internet Policy Day 2 - Workshop Session No. 3 Interconnection, IXPs and Voice-over-IP Prepared for CTO by Link Centre, Witwatersrand University, South Africa

2. CTO / DFID Internet Policy workshop, Jamaica, 22-26 April 2002 Sessions Summary F Day 1 –Session 1History and technical background –Session 2Market structure F Day 2 –Session 3Interconnection, IXPs and voice-over-IP –Session 4Governance and domain names F Day 3 –Session 5The impact of telecommunications regulation –Session 6Internet specific policy issues F Day 4 –Session 7Content on the Internet –Session 8E-commerce issues F Day 5 –Session 9Internet tools for regulators –Session 10Conclusion, review and evaluation

3. CTO / DFID Internet Policy workshop, Jamaica, 22-26 April 2002 Interconnectio, IXPs and voice-over-IP F The purpose of this session is: –to understand how Internet interconnection policies and economics have developed –to examine the technical and economic operation of an Internet exchange point (IXP) –to review interconnection issues such as the value of traffic and dominant operators –to look at some examples of voice over the Internet –to review some policy approaches to these issues and look at some likely future trends

4. CTO / DFID Internet Policy workshop, Jamaica, 22-26 April 2002 Topics of Discussion F History of Internet interconnection F Interconnection terminology F Interconnection agreements F Internet exchange points (IXPs) F Case studies: JINX and KINX F Interconnection issues F Regulatory strategies F Trends F Voice-over-IP

5. CTO / DFID Internet Policy workshop, Jamaica, 22-26 April 2002 History of Interconnection F Why interconnect? –For routing of traffic (at least one interconnection) –For efficient routing (multiple interconnections) F Co-operative era (ARPAnet/NSFnet period) –NAPs, development of ‘peering’ policies –Restrictions on commercial use F Commercial era –Private exchanges developed in parallel to NAPs –Negotiated bilateral commercial agreement

6. CTO / DFID Internet Policy workshop, Jamaica, 22-26 April 2002 Interconnection Terminology F ISPs –Reminder: ISPs means IAPs –But what is an Internet access provider u Do Internet Cafés count? –What is a “connection to the Internet”? u From outside the US: international connections F Backbone ISPs –Operate national networks –Often have international interconnection

7. CTO / DFID Internet Policy workshop, Jamaica, 22-26 April 2002 Interconnection Terminology F Peering –Peer = network of roughly the same ‘size’ –Size might mean: u geographic reach u traffic volumes u customer base F Transit –When there is no direct link between two networks -- traffic transits across other networks –Provided mainly by backbone operators

8. CTO / DFID Internet Policy workshop, Jamaica, 22-26 April 2002 Interconnection Terminology

9. CTO / DFID Internet Policy workshop, Jamaica, 22-26 April 2002 Interconnection Terminology F Traffic –Traffic is of increasing importance –Internet Protocol (IP) has no built-in cost accounting –Possible to measure traffic with other protocols u Historically difficult and costly u Becoming easier and cheaper with time F Internet Exchange Points (IXPs) –Centralised exchange facilities –Many ISPs exchange Internet traffic at each IXP

10. CTO / DFID Internet Policy workshop, Jamaica, 22-26 April 2002 Interconnection Agreements F ISP/customer –Two way flow of traffic –One way flow of money (customer to ISP) u Connection fee u Monthly rates (fixed or traffic based) –Discounts for strategic customers –Customers might also be ISPs

11. CTO / DFID Internet Policy workshop, Jamaica, 22-26 April 2002 Interconnection Agreements F ISP to ISP –Neither ISP is a customer of the other –Two way flow of traffic –Interconnection costs usually shared –‘Larger’ ISP may charge smaller ISP a traffic-based fee –Transit agreements are a special case of ISP-to-ISP interconnection agreement

12. CTO / DFID Internet Policy workshop, Jamaica, 22-26 April 2002 Interconnection Agreements F Multi-ISP exchange –IXP established –Multiple ISPs connect to the IXP –Multi-directional flow of traffic –Each ISP can still chose which of the other ISP networks to interconnect with, and on what terms –Sometimes the IXP operator has some over-riding policies

13. CTO / DFID Internet Policy workshop, Jamaica, 22-26 April 2002 Internet Exchanges F Technical overview of exchanges –Cabinets housing a number of routers (at least one per ISP) and at least one switch –Connections from each ISP to the IXP –Redundancy is desirable F Pros and cons –Pro: Cost savings (costs can be very low) –Pro: Efficient traffic exchange –Con: Less redundancy than meshed interconnection –Con: Historically, IXPs have been congested

14. CTO / DFID Internet Policy workshop, Jamaica, 22-26 April 2002 Internet Exchanges

15. CTO / DFID Internet Policy workshop, Jamaica, 22-26 April 2002 Case study: JINX F JINX –Johannesburg Internet Exchange –Established late-1996 u [stats from early 2000] F Traffic –Peak throughput 34 Mb/s F Cost of extra 34 Mb/s capacity –$360,000/month (SA half-circuit) –$120,000/month (US half-circuit) F Costs –$40,000 initial set-up –$1,000 per month F ‘Savings’ –SA Internet industry: $5.7 million annually –SA foreign exchange: $2.5 million annually

16. CTO / DFID Internet Policy workshop, Jamaica, 22-26 April 2002 Case study: KIXP F What happened? –Nov 2000: Kenyan IXP goes live, initially connecting four ISPs –Dec 2000: Communications Commission of Kenya (CCK) shuts- down KIXP –Dec 2001: After a year of negotiation, KIXP reopens F Why? –Unlicensed service –Pressure from Telkom Kenya? F Effect of the shut-down on consumers –Delays in e-mail traffic –Slow web access, impaired international connectivity –Continuing failures of ‘national backbone’

17. CTO / DFID Internet Policy workshop, Jamaica, 22-26 April 2002 Interconnection Issues F Determining value –Interconnection agreements tend to reward the larger of the two interconnecting ISPs –But larger ISPs also ‘use’ the small ISPs network, deriving benefits –There is value to the traffic flowing in each direction –Market forces essentially determine where the value lies in each agreement –Strong incentive for ISPs to reach amicable interconnect agreements: Need each others’ networks

18. CTO / DFID Internet Policy workshop, Jamaica, 22-26 April 2002 Interconnection Issues F Dominance of backbone providers –Move from zero-charge ‘peering’ towards traffic-based interconnect seem reasonable –But, this has happened at the same time as massive consolidation of the Internet market –Four companies control 85-95% of traffic on the Internet –US industry and government agree: no immediate threat to a competitive industry –Regulators must pay attention to dominant players –Dominant players do not necessarily make good IXP hosts

19. CTO / DFID Internet Policy workshop, Jamaica, 22-26 April 2002 Interconnection Issues F The US-centric Internet…? –For both historical and economic reasons, the US backbone is also the world’s Internet backbone –Routing between neighbouring countries is often via the US -- this is not very efficient –One view: It isn’t fair that there is a one-way flow of money but a two-way flow of traffic over international connections to the US backbone –Alternative view: The US provides cost-effective transit to hundred of other countries using its national backbone

20. CTO / DFID Internet Policy workshop, Jamaica, 22-26 April 2002 Interconnection Issues F Local exchange interconnection –End-users connect to ISPs via telephone exchanges –ISPs lease telephone lines from telcos which are connected to banks of access modems (or other equipment) –In some places local exchange carriers (LECs) offer commission to ISPs on call revenue generated by customers connecting to the ISPs’ networks u Economic model behind many ‘free’ ISPs

21. CTO / DFID Internet Policy workshop, Jamaica, 22-26 April 2002 Interconnection Issues F Cable interconnection –Cable is a good alternative access medium for connecting end-users to the Internet –In the US, there have been concerns that exclusive deals made between cable operators and some ISPs may constitute unfair practice. –Regulatory pressure has sped up the opening up of the cable access market

22. CTO / DFID Internet Policy workshop, Jamaica, 22-26 April 2002 Regulatory Strategies F Dangers of regulation F Strategies –Domestic competition –Protection from dominant players –Transparency

23. CTO / DFID Internet Policy workshop, Jamaica, 22-26 April 2002 Trends F Likely future trends –Move from free ‘peering’ to settlement based interconnection –Prices for international Internet interconnection will continue to drop steadily –New protocols and better traffic management will allow ISPs to offer increasingly differentiated services

24. CTO / DFID Internet Policy workshop, Jamaica, 22-26 April 2002 Voice over the Internet F Voice over the Internet –Sample applications u Internet user Internet user u Internet user telephone users u Bulk shipping of international voice traffic over Internet links –Regulatory responses u Ban/limit -- only partially effective u Promote –Note: Voice-over-the-Internet is not the same as Voice-over-IP. IP can also be used in private networks.

25. CTO / DFID Internet Policy workshop, Jamaica, 22-26 April 2002 Summary F Interconnection agreements have moved from co-operative to commercial over time F Interconnection happens at all levels F Agreements are based on the perceived value of the connection to each party F Internet exchanges are a technically efficient and cost-effective way to connect multiple networks F Voice over the Internet is eroding traditional telephony pricing models