IXPs' impact on the Internet ecosystem in emerging markets

The problem

The Internet Society (ISOC) wanted to understand the economic benefits of establishing Internet exchange points (IXPs) in emerging markets.

As the Internet increasingly globalises, the interconnection between networks, content providers and users is becoming more and more critical to creating the 'network of networks' that is the Internet.

At the centre of this globalisation are IXPs – facilities where all Internet players can interconnect directly to each other, thereby improving quality of service and reducing transmission costs.

IXPs have already played a key role in the development of an advanced Internet ecosystem across North America, Europe and Asia. Today, the number of IXPs is increasing in Africa, despite the region's more-challenging economic and telecoms environment. Early in the Internet development cycle in most countries, Internet service providers (ISPs) often find it cost-effective to use their international Internet connections to exchange domestic traffic. The establishment of an IXP in the country enables local ISPs to connect directly and exchange domestic traffic, saving on international transit costs while improving performance.

The solution

Analysys Mason undertook a comprehensive study entitled 'Assessment of the impact of Internet exchange points: empirical study of Kenya and Nigeria'.

The study shows how IXPs enable Kenya and Nigeria to save millions of dollars in telecoms costs and raise additional revenue, while simultaneously speeding up local data exchange and encouraging the development of locally hosted content and services. The following are some of the headlines from the study.

• The Kenya Internet Exchange Point (KIXP) has dramatically reduced the latency of local traffic from 200–600ms to 2–10ms on average, while saving local ISPs almost USD1.5 million per year on international connectivity charges.
• In Nigeria, the Internet Exchange Point of Nigeria (IXPN) has produced a similar reduction in latency while saving operators almost USD1 million in connectivity costs per year.
• In Nigeria, the presence of the IXP has encouraged the repatriation of financial platforms for online banking that were previously hosted overseas, while in Kenya the IXP has helped accelerate citizens' access to online tax and customs services offered by the Kenya Revenue Authority.
• The presence of effective IXPs induced Google to place a cache in both countries in Spring 2011, which has significantly increased the amount of locally distributed content (notably YouTube videos) at faster speeds.
• Improved access to local content has increased usage, helping to increase the mobile data market by at least USD6 million per year in Kenya.

The result

The result was a unique study that quantifies the benefits of best-practice IXPs. It demonstrates the central role that IXPs have had in developing the ecosystems and paving the way for growth in each country – particularly in facilitating advanced services, such as cloud applications.

Karen Rose, senior director of development strategy at the Internet Society, said of the study, "It puts into clear context the commonly accepted but seldom quantified proposition that IXPs are essential for any country aspiring to tap into the global Internet economy. Offering more than just cost and performance benefits, well-run IXPs serve as a catalyst to dramatically enrich a country's Internet ecosystem, opening a new world of possibilities with comparably minimal investment."

Download the study from the Internet Society's website.