The next telecom battlefield

Dec 4, 05:29 PM

At this very moment, telecommunications companies and governments worldwide are participating in the World Conference on International Telecommunications (ITU) in Dubai. Some of the topics for discussions are the jurisdiction of governments over the Internet and filtering of Internet traffic.

However, the next battlefield of the Internet is being overlooked: the relationship between data centers and Internet exchanges which are the “Hubs” of the Internet, the key nodes in a global communications network that enable internet traffic.

The crucial choice is: should Internet Exchanges operate independently from data centers, or should we allow full control over the exchanges by a few datacenter operators? The first choice is more popular throughout Europe, and has led to the rapid growth of giant hubs and low cost access to Internet. The second is more current in the United States, where exchanges owned by datacenter providers compete for market share.

Data centers house the equipment that runs the Internet. They provide space and power to their customers who fill them with communication equipment, servers, hard drives and computers, that enable users to post pictures on Facebook, watch YouTube video or read reputable financial newspapers online.

The first carrier neutral data centers were built following the liberalization of the telecommunication markets in the nineties. As their name implies, they function independently from network operators.

Datacenters house the Internet Exchanges (IX) used by Internet Service Providers (ISPs) to establish interconnections. In Europe, the ISPs joined forces to develop not-for-profit and commercial Internet Exchanges, independent from the data center operators. The result is the “neutral model”:  data centers provide housing for networking equipment, and ISPs connect to the data centers and provide transport services. Customers can choose which carrier to use for transport, and in which data center they will house their equipment to connect to the Internet.

In this model, an Internet Exchange has the interests of its members at heart, not solely the interests of one data center operator.  As a result, the major Internet exchanges in Europe are accessible in all important data centers. In the Netherlands, the exchange is called Amsterdam Internet Exchange or "AMS-IX".  In Germany, the exchange is "DE-CIX" in Frankfurt, and “ECIX” in Dusseldorf, Hamburg and Berlin.

Fifteen years later,  we have competitive telecommunication markets in many parts of the world, a vibrant Internet with busy Internet Exchanges and competitive ISPs, choice of data centers, and on-going investment in fiber networks.  Success can be measured by lower prices for Internet access, availability of bandwidth, and content providers expanding their platforms into these open markets.

Carrier neutral data centers have become giant "Hubs" where operators interconnect their networks and exchange traffic.  With hundreds of connecting networks, they are the airports of the Internet.

Though the Internet market liberalized at the same time, remarkably different market structures developed on both sides of the Atlantic.

In the United States, the data center operators also control the exchanges.  After the privatization of the Internet in the mid-nineties, nearly all exchanges became commercial Internet Exchanges. The data center operator provides space and power, and also owns and operates the Internet Exchange. A customer wishing to link up to other networks must buy both services from the same data center provider where he places his equipment. The result has been a fragmentation of the Internet Exchange market. Today the single largest exchange is not in the United States, but in Germany: Frankfurt is the home of the biggest communications hub in the world. In the top 10 of Internet Exchanges worldwide, only two are in the US.

With the spread of the Internet across the world, governments should encourage the neutral exchange model, in various ways. Firstly, by creating or supporting the creation of Internet Exchanges independent from datacenter operators, and, secondly, by encouraging private investment in the construction of carrier neutral data centers and fiber networks. Diversity of networks in these hubs provides greater choice and increases reliability, and will lead to lower cost of communications, enabling economic growth and prosperity.

To some extent this is already happening. In Switzerland and France, ISP communities followed German and Dutch examples and joined forces to establish neutral internet exchange associations. The France-IX Internet Exchange Association now has over 200 members. Singapore established SGIX, a neutral Internet exchange in 2009. And in July 2012, the African Union decided to develop Internet exchanges across the continent with the support of the Internet Society, a global association promoting open and equal access to the Internet, DE-CIX in Frankfurt and AMS-IX in Amsterdam.

Governments can contribute to the growth of the worldwide telecommunications by supporting the creation of neutral Internet Exchanges.  To stimulate lower cost of connectivity and customer choice, the ITU conference should voice its support for competitive markets and strongly favor this path for the future.

Postscript: And keep the ITU away from regulating the Internet.

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