“There is no more cost efficient way to improve the infrastructure of the Internet in a country than to set up an IXP.” – Michael Kende at the Internet Governance Forum 2012 in Baku
Discussing Internet regulation is one of the prime functions of the Internet Governance Forum – this year in Baku as well. However, on top of that this uniquely assembled conference had an additional guiding theme this year: “Internet Governance for Sustainable Human, Economic and Social Development”.
In order for the Internet to grow it is important to build more Internet Exchange Points and to localize data – experts expressed this point of view in many workshops at the Internet Governance Forum. To understand this recommendation, it is fruitful to have a look at the idea behind Internet Exchange Points, new developments and the surrounding regulatory contexts.
Competitors cooperate at Internet Exchange Points
Internet Exchange Points are platforms where a number of Internet Service Providers exchange traffic with each other. The idea emerges since the 1990s: Instead of building numerous direct cable connections to each other or rent connection capacities from third parties, each party connects to the Internet Exchange Point. Here the data is being exchanged bilaterally on peering basis. Usually this neither includes payments nor even a formal contract.[fn]More than 99 percent of all traffic transfers take place informally on peering basis, according to Bill Woodcock. Peering means that ISPs transport their partner's data on their network – without or with charge ("paid peering"). So in peering relationships the partners may not get access to the entire internet. The contrasting model is called “transit”. In this case Internet Service Provider or network operators charge for the termination of traffic at any endpoint.[/fn] Through this mechanism competing Internet Service Providers cooperate at Internet Exchange Points because together they take advantage of cost reduction, higher bandwidth and less latency.
Local storage, short paths for the data
When Internet Exchange Points have been established successfully, most of the time content providers follow and build data centers nearby. This may include local content providers like governments, businesses with big amounts of content like Google or Facebook but also so called Content Delivery Networks (CDN) like Akamai. CDNs work as intermediaries. It is part of their business model to deliver content supra-regionally and quickly by making it available locally.[fn]At the biggest German Internet Exchange Point in Frankfurt am Main more than 480 parties cooperate with each other this way. Internet Service Providers like 1&1 or Deutsche Telekom exchange data with content providers like Facebook, Microsoft or Akamai. Thus, the Windows update received by a German user most likely is not being transferred from the company’s head office in Redmond but from a data center in Germany.[/fn]
The idea behind local data centers: The closer the content is to the consumer the shorter are the routes and the faster it can be delivered. Low latency is especially important for demanding cloud services or video streaming, as Robert Pepper (Cisco) emphasized at the Internet Governance Forum.
A recent report from the Internet Systems Consortium states some statistics on the trend: Within the last ten years the number of Internet Exchange Points worldwide rose by 10 percent. Bill Woodcock, research director at Packet Clearing House, added his findings to the presentation: Most Internet Exchange Points are being built in the Caribbean, fewest in the Middle East. “What we see there is to some degree the level of frustration and patience with importation being. The Caribbean, I think, got tired of exporting capital to wealthier countries. That frustration built up and they decided: We need to be able to do this for ourselves. In the Middle East, I think, there is much greater feeling that the amount of money involved is negligible. So they may as well just ship it all to Europe and not think about this particular issue.”
Barriers and advantages in the regulatory environment
From a technical point of view Internet Exchange Points facilitate efficient traffic management. However, participants at the Internet Governance Forum also explained possible obstacles that hinder further deployment. Michael Kende, author of above mentioned ISC report, emphasized that network operators today appear to be more resistant to IXPs than in the early days: “They view IP transit, the sale of transit, sometimes as a revenue gathering and they do not want to appear as an interconnect at the IXP. So it is very challenging to get an incumbent to join.”
Looking at the contrary: Which circumstances make the development of Internet Exchange Points more likely? Paul Wilson, Director at APNIC, the Internet Registry for the Asia-Pacific-region, is convinced that the process has to be bottom-up. Professional ties overarching the technical aspects develop, if groups find their common interest and pursue it in form of a non-profit organization. From that point of view promoting Internet Exchange Points also is about capacity building – and about self-governance: “The decision making and the structure should be in the hand of those people [the beneficiaries of the IXP]. This is very much a mandatory prerequisite for a successful Exchange Point establishment. You don’t want hurdles in terms of bureaucratic impediments.”
Internet Exchange Points foster cooperation among competitors. They increase bandwidth, facilitate a faster Internet and reduce costs by lessening local dependencies from transit connections. And they enable a dialogue about Internet connectivity, technology and regulation. By activating all these processes Internet Exchange Points can serve society – which brings us back to the initial theme of this year’s Internet Governance Forum.
Tip: The Internet Governance Forum is well documented. Videos from all panels and workshops can be found at http://webcast.igf2012.com/ondemand.
 More than 99 percent of all traffic transfers take place informally on peering basis, according to Bill Woodcock. Peering means that ISPs transport their partners data on their network without charge and vice versa. The opposite model is called »transit”. In this case Internet Service Provider or network operators charge for the transfer.
 At the biggest German Internet Exchange Point in Frankfurt am Main more than 480 parties cooperate with each other this way. Internet Service Providers like 1&1 or Deutsche Telekom exchange data with content providers like Facebook, Microsoft or Akamai. Thus, the Windows update received by a German user most likely is not being transferred from the company’s head office in Redmond but from a data center in Germany.