1. NANOG Panel Discussion: Are “Transit Exchanges” and “Peering Exchanges” Self-Differentiating?
Toronto
June, 2002

2. Keith Mitchell Chief Technical Officer XchangePoint Philip Smith Chair, APNIC Internet Exchange SIG Bill Woodcock Research Director Packet Clearing House

3. Background white-papers for this discussion:
…/NANOG peering-trans.html
…/nanog-asia-ix.ppt

4. Assumptions & Observations
Old belief: All exchanges are functionally similar, differing principally qualitatively.
Old belief: People go to exchanges to peer, but buy transit at their own location or within a colocation facility.
However: Some exchanges are vastly more expensive than others, and provide services which are economically unsupportable within a peering economy.
And: Many parties buy and sell transit within exchange facilities, either over crossconnects or through the switch fabric.

5. Hypothesis
There are actually two poles toward which exchanges can be optimized: peering or transit, and they pose very different economic and provisioning requirements.
It may not be possible to meet both requirements with maximal success within the context of a single exchange.

6. Exchange Points and Aggregated Risk
Redundancy is never necessary on a peering path. Full aggregation benefit may be extracted from it without danger, since the redundant transit path provides a “safety net.”
Transit contains full routes, including those not learned through peering, and constitutes a sole means of reaching most destinations. It thus requires redundancy and reliability. Aggregation benefits cannot be fully realized on a transit link.

7. Peering Exchange Transit Exchange
Maximization of aggregation benefits suggest that
exactly one peering exchange exist in a region, and
that it include all available peers.
Reliability by dint of redundancy suggests that
two or more transit exchanges exist in a region, and
that each can operate competitively with no more than three buyers and three sellers.

8. Peering Exchange Transit Exchange
Aggregation suggests that peers should be reached through the switch fabric, up to the limit of the capacity of the fastest available switch port.
Reliability suggests that if only a couple of transit relationships are needed within an exchange, direct interconnections are the best means of facilitating them.

9. Peering Exchange Transit Exchange
Maximum benefit is reached at the lowest price.
The price is bounded by the additional cost of accommodating otherwise-peered traffic through transit during peering exchange downtime.
Maximum benefit is reached at the highest reliability.
The price arbitrages the difference between the sum of the market sale price plus backhaul and the cost of transit delivered at the customer premises.