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Interconnection Strategies for ISPs

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. Research Focus.

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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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