The evolution of the internet exchange has been steady and unremarkable since the need first arose in the 1990s for points where ISPs and content providers could peer with each other and exchange traffic. But in the last year or two, the pace of the market’s development has picked up dramatically. New exchanges have been launched in places where none existed before as demand grows for the speedy and efficient movement of traffic all over the world.
The rise of streamed video and other high bandwidth applications are naturally a factor, with exchanges playing a key role in getting this type of traffic closer to the user. The worldwide growth of IP services, such as VoIP, has also played a part. And the trend for enterprises to put more and more applications in the cloud has added to the pressure faced by data centres to deliver seamless and continuous services thus upping the importance of exchanges in the wider internet ecosystem.
In simple terms, the prime driver for these new exchanges is an enhanced understanding of just how important location is in today’s internet market, and a recognition that the market’s centre of gravity is spreading beyond traditional Western European and North American bases.
“The general growth of bandwidth and services such as video certainly drives the need for more space within IX sites, but even more critical is the need to deploy services close to users to minimise latency and maximise the quality of experience,” argues Jay Gill, principal product marketing manager with vendor Infinera. “Where once a company could manage with a web presence in a single location, now it must distribute its service delivery points and replicate its data across many locations. This drives more demand for data centre space and direct interconnections in every major metro area and market. And it drives the need for more high-capacity, metro area data centre-to-data centre interconnections.”
The European model
The European IX scene has been driven in recent years by three main players – LINX in London, AMS-IX in Amsterdam and DE-CIX in Frankfurt. All three have been taking advantage of shifting market dynamics to spread outside their regular markets. “Our first 10 exchanges were all in Germany,” says Frank Orlowski, chief marketing officer with DE-CIX.
“Over the past few years we’ve had more and more requests from customers from various places to locate exchanges in their regions, for a number of different reasons. We opened in the Middle East in Dubai five years ago, which has been a good experience and pretty successful for us. We added Istanbul, which complements Dubai well. There’s more and more capacity connecting the Middle East and Europe.”
DE-CIX has also launched in the competitive market of New York, proving, says Orlowski, that the operation can deal with both emerging and highly developed new markets. He expects DE-CIX to be making more US announcements soon, but says it is too early to divulge details. He feels that the time is nearly ripe for exchanges to explode in other emerging regions, such as Africa’s more progressive economies, but plainly DE-CIX is wary of committing capital to such a venture right now: “We provide solutions for Angola Cables, and are working in Rwanda, but not all these markets need to be directly served by us,” he explains. “We provide advice there instead. There are only so many opportunities you can look at to actually build an exchange.”
Dutch exchange operation AMS-IX operates, in addition to its home market of Amsterdam, facilities in Hong Kong, Curacao, New York, Chicago, and the Bay area of northern California. It recently opened an exchange in Mombasa in Kenya, but the venture proved premature and has now closed.
“The market conditions weren’t right,” says AMS-IX chief commercial officer Mark Cooper. “Connectivity is still very expensive in the country, and there is a lack of ISPs setting up there. We’re not saying no to Africa forever, but the conditions for an exchange to work involve multiple data centres in a geography. You need fixed infrastructure, but in Africa there’s often a lockdown on the market by the incumbent. This will change. Just look at the good work Liquid Telecom is doing.”
In Curacao in the Caribbean, culturally and politically affiliated to the Netherlands, it has been a different story. Cooper says a huge and positive impact has been made on the island and on the surrounding region, with traffic volumes and speeds much increased.
AMS-IX has also been a key player in the Hong Kong internet market since 2012: “In Asia it’s about establishing relationships first and business follows,” he says. “We’ve no plans for more expansion for the moment. It’s about getting as many customers on board as we can. Other European capitals to the ones we’re in are well served by existing exchanges. We don’t want to disrupt a market that’s running well.”
Entering emerging markets
To build exchanges before there is a critical mass of regional service providers and data centres is not practical, agrees Rutger Bevaart, CTO with Custom Connect, a provider of carrier-neutral connectivity solutions: “Many developing countries provide great opportunities for IX providers, but success depends on the ability of countries within a region to work together to create regional connectivity hubs and attract international cable systems and capacity,” he believes. “When each individual country develops its own IX strategy the result is a fragmented landscape with small and unattractive IXs. By sharing the vision and creating a unique proposition in a bigger region the required scale is achieved to create a successful IX and attract businesses to support it.”
At all points, Bevaart sees the mutually beneficial relationship between IX and data centre partner as critical: “When data centres and IXs come together a very strong foundation is created, enabling businesses to evolve and grow,” he says.
Traditionally there have been significant differences in the partnership models between the different regions of the world.
As the market evolves, says Bevaart, the large exchanges manage and operate regional exchanges in developing countries and regions – teaming up with data centres in that region to attract carriers, ISPs and enterprise customers at the same time. “This will effectively kickstart a region’s growth with all three essential ingredients – data centre, IX and connectivity,” he adds.
The US exchange scenario has always followed its own rules. On that side of the Atlantic, the need for carrier neutral data centres where ISPs could peer with other service providers without having to buy upstream connectivity from the centre’s owner has seen the rise of neutral facilities, owned by the likes of Equinix and CoreSite. These facilities have prospered by offering exchange services, along with a raft of other services, on a straightforward commercial basis. In the US internet exchange market, such carrier neutral exchanges control most of the country’s traffic. But while they may not be controlled by specific carriers, they are certainly not open to all traffic, on the European not-for-profit model typified by AMS-IX and DE-CIX, but simply the traffic of their customer base.
The Open-IX initiative has the aim of reforming the US market by promoting data centre-neutral European-style exchanges. The Open-IX-defined model is favoured by nearly all the big players in the content world – names like Netflix, Google, Facebook, Microsoft, Twitter, Akamai and LinkedIn - which no longer want to depend on a limited set of peering options defined by one data centre provider. They want an alternative that lets them reach anywhere in any data centre. Paying upstream to get to these other data centres is a flaw in their business model that they believe Open-IX can fix.
Transforming the US
Two European exchange players – AMS-IX and LINX – have made their move into the US market on this Open-IX model. One of the key supporters of Open-IX is data centre operator Digital Realty and it is inside its Bay Area centre that AMS-IX has opened its first Californian IX. Back in New York, AMS-IX is housed in a number of centres, not all run by Digital Realty. Plans to extend to other West Coast metros already exist. DE-CIX, it should be noted, is not an Open-IX signatory. David Howson, chief network officer and head of Europe for operator the Zayo Group, says that the European exchange model has found a ready market in a US market schooled in the commercial model: “The not-for-profits found that the diversity in the US market wasn’t there, which means they got to move in as alternative providers, leveraging the data centre and colo providers that carriers and content providers deploy into,” he says.
The selling point for not-for-profit, member-governed IXs is their emphasis on getting content closer to the network, says Rob Bath, VP of global solutions at data centre and co-location business Digital Realty: “They seek out places where there is the pairing of large content providers and neutral data centres,” he says.
Among the important differences between US and European markets is who is to be found in these public exchanges: “The big eyeball networks don’t appear on them – AT&T, Verizon, Comcast and so on,” says Bath. “In Europe there’s more appetite for peering across exchanges in a metro area. Talk Talk, BT, Sky are all happy with that. In the US, the eyeball networks will be forced into a more open arrangement and away from just single building plays. We’re seeing more recognition of the synergies of an open platform.”
Another public exchange player is RTX. Neil Kitcher, the company’s CMO, believes that as the demand for internet access surges, competition is increasing between internet exchanges: “They need to differentiate to make themselves the most compelling option,” he says. “Providers that overcome the challenges in the wholesale exchange community are best placed to become the definitive choice for telecoms operators.”
Winners, he says, will be those that provide innovative and flexible solutions to customers and suppliers in a secure environment: “This will enable them to thrive in a highly competitive market, continuously refocusing resources to capitalise on new territories and customers that are hungry for change.”
One market where change is moving rather faster than is comfortable for many people is Russia (see boxout). The carrier neutral exchange model is being pioneered there by IXcellerate, which opened for business in 2012. The company’s CEO Guy Willner points out that the biggest exchange in Moscow is MSK-IX which is now owned by Rostelecom.
But in a country of Russia’s size and power, the market is not all about just one metro: “We want to add peering regionally, not just in Moscow,” says Willner. “We’re looking at places around Eurasia, from anywhere between Istanbul to Beijing really. The internet quality in many parts of Russia is rubbish, and could be improved massively. Bandwidth pricing in Moscow is pretty much at normal European levels, but anything up to 10 times that as you head out. There’s some big distances in a country with 11 time zones.” To that end, IXcellerate has just launched Eurasia:peering, a neutral Layer 2 peering point that will connect Russia with Eurasian neighbours including Uzbekistan, Kazakhstan, Belarus, Georgia and China.
As the shape and scope of the internet grows and grows, it is difficult to predict exactly which exchange model will ultimately prosper. But that the future of exchanges is central is not in doubt, says DE-CIX’s Orlowski.
“The way my 10 year old daughter consumes TV and talks to her friends is so different to me,” he says. “It’s all about streaming, and there’s a lot more change ahead in how TV content is consumed. What’s needed is somebody to facilitate this, but who is not there to try to squeeze the last drop out of the customer.”
