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Interconnection Strategies for ISPs

Learn about the benefits and cost comparisons of Direct Circuit vs. Exchange-Based Interconnection Strategies for ISPs. Understand the cost drivers, efficiency factors, and revenue generation potential to make informed decisions. Discover how optical efficiencies and aggregation can lead to cost savings and scalable bandwidth solutions. Workshop conducted by William B. Norton, Co-Founder of Equinix.

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Interconnection Strategies for ISPs

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  1. Interconnection Strategies for ISPs William B. Norton Co-Founder, Chief Technical Liaison <wbn@equinix.com> Workshop: A Practical Guide to Interconnect, Transit & Peering Earls Court Conference & Exhibition Centre, London April 26, 2002 09:30-17:00

  2. Research Focus • Interconnection Strategies : Direct Circuit Interconnect Model vs. Exchange-based Interconnection Model • When do each of these make sense? • Based on current practices, existing or soon to exist technology • White Paper & Financial Model

  3. Neutral Internet Business Exchange Model • Basis for Exchange-based model comparison • Infrastructure • Neutrality • Facilitation • Players

  4. Direct Circuit Interconnection Strategy • Cost drivers: • Circuit sizes (c) • Circuit miles (m,loc) • CircuitCost=fn(c,m,loc) • # of participants (n) • (1/2 cost paid by each party) • Direct Circuit Cost Function: • ISPXCCost=(n-1)*CircuitCost()/2

  5. Exchange-based Interconnection Strategy EXCost=BDC+(n-1)*x/2 But does it make sense?

  6. Exchange-Based Interconnection Model • Direct circuits replaced with: • OC-12 into Exchange • Fiber cross connects • Cost Drivers: • Big OC-12 Direct Circuit • Cheap Fiber Cross Connects • Aggregation Efficiency over OC-12 (2:1,3:1) • Rack Fees • Cost Formula: ExchangeModelCost=BigDirectCircuit()+(n-1)*x/2+RackFees()

  7. Cost Comparison at n=5 costDCfn()=(n-1)*C/2 C=OC-3 @ $11,400 n=5 costDC=(4)*$11,400/2 costDC=$22,800/mo costExchfn()=BDC+(n-1)*x/2+Racks BDC=OC-12 @ $23,000 n=5, 1 Rack@$1500 costExch=$23,000+(4)(200/2)+$1500 costExch=$24,900/mo More expensive to use Exchange-Based Interconnection Strategy at n=5. N>5?

  8. Exchange-based vs. Direct Circuit Cost Model At low n, cost of big circuit is greater than half-cost circuits. Steps represent incremental circuit growth req’d for interconnection. Aggregation kicks in… efficiency=2:1 (to 3:1) Dynamics accelerate as BW requirements grow… Today’s quotes->Monthly savings can get huge

  9. Exchange-based applying DWDM over dark fiber Facilities-based providers win big! Seamlessly scale BW into exchange Seamlessly scale BW within exchange to other ISPs/CPs Aggregation back to net

  10. Direct Circuit vs. Exchange-based Interconnection Strategies BW Scaling: DC: Linear BC: Stepped Linear DF: Linear Efficient

  11. IX Revenue Generation Potential

  12. Revenue Projections Financial Model Assumptions • 65 participants (5 carriers, 10 Autonomous Content Providers, 50 ISPs) • Revenue & Projections figures based on interviews and participation modeled from PAIX • Assuming zero growth in bandwidth demand through period • Sufficient bandwidth into exchange to accommodate load • The Point: Incremental Revenue Generation not possible with Direct Circuit Model

  13. Future of the IXP? Content Distribution ISP Hosting    Internet Service Providers Usenet Component Service Providers ISP E-mail ISP Backbone Autonomous Content Providers & Aggregators Access CP Caching Systems Inc.    Search CP Carriers MarketPlace: Stratification of component operations, fast creation & provisioning of packaged operations services for resale to customers Implication: IXP Content Sources, bandwidth demands

  14. Conclusions • Direct Circuit Interconnection Strategy makes sense for interconnection among ~5 or fewer parties • Aggregation and Optical efficiencies lead to tremendous cost efficiencies by using big circuits into exchange • Facilities-based providers win big applying DWDM into exchange • Large bandwidth (OC-12) for interconnections and/or large # of participants exhibit good scaling properties for exchange-based model • Incremental transit sales possible in exchange-based model • White paper available in RTF -- comments welcome Business Cards or e-mail to: wbn@equinix.com

  15. Direct Circuit Interconnect Model Exchange-Based Interconnection Model Questions?

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