| Abstract: | This talk highlights the tradeoffs between the direct circuit interconnect model and the exchange point interconnection model for ISPs. The paper discusses the operations and financial models (taking into account the circuit costs, cost of exchange participation, cost of dark fiber, etc.) and the implications of these strategies across the number of interconnection participants and bandwidth utilization between the participants.
Major points to be presented include the following:
- For ISP interconnection, direct circuit interconnection is financially attractive for low numbers of connections (O(5)) of relatively low bandwidth (DS-3/OC-3). This is due to the fact that ISPs typically pay only half of the cost for the direct circuits between each other, while they pay the full freight for the big pipe into the exchange. ISPs may want to use the exchange for a POP, but barring use like that, if all one wants to do is exchange traffic with these other five folks into the foreseeable future, the direct circuit interconnect model makes sense.
- As the bandwidth and number of interconnections grow, the exchange point interconnection model proves much more scalable for two reasons. First, as bandwidth grows between participants, ISPs are able to aggregate interconnection traffic over increasingly large pipes back to their cloud, yielding potentially significant economies of scale. The direct circuit interconnection does not provide for this aggregation. Secondly, operationally, there are fewer backhoes in an exchange, fewer local loop providers to troubleshoot, etc. The greater the dependence on interconnection, the more hardened one wants that interconnection environment.
- Several of the exchanges also provide for the centralization of content, allowing additional transit sales revenue that potentially dwarf the cost savings highlighted above for interconnection. The direct circuit interconnect model doesn\'t allow for this additional revenue opportunity.
The analysis finds that facilities-based ISPs win big since (being able to exploit WDM technologies) they can seamlessly grow the pipe(s) into the exchange while the direct circuit interconnection model can\'t take advantage of this level of aggregation. These are among several of the dominant reasons for the IXP to be around well into the future. |
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