Interconnection Strategies for
ISPs
William B. Norton
Co-Founder, Chief Technical Liaison
<[email protected]>
Workshop: A Practical Guide to Interconnect, Transit & Peering
Earls Court Conference & Exhibition Centre, London
April 26, 2002
09:30-17:00
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
Neutral Internet Business
Exchange Model
• Basis for
Exchangebased model
comparison
• Infrastructure
• Neutrality
• Facilitation
• Players
Content
Providers
Neutral Internet
Business Exchange
Model
Internet Services
Companies
Carriers
Direct Circuit Interconnection Strategy
Point-to-point circuits for ISP interc onnec tion
for regional presenc e
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:
S
S
S
S
G
G
G
G
U
U
U
U
A
A
A
A
C
C
C
C
ISPXCCost=(n-1)*CircuitCost()/2
Exchange-based Interconnection
Strategy
Expensive OC-3 circuits
for ISP interconnection
replaced with...
A big pipe and...
Inexpensive fiber cross connects
for Interconnection at OC-3 (or any speed)
OC-12
S
S
S
S
G
G
G
G
U
U
U
U
A
A
A
A
C
C
C
C
S
OC-12
G
OC-12
OC-12
U
A
OC-12
EXCost=BDC+(n-1)*x/2 Aggregation of traffic exchange
C
But does it make sense?
over big pipes yields
2:1 efficiency increase over direct circuit alternative..
Exchange-Based Interconnection
Model
Direct circuits replaced with:
•OC-12 into Exchange
•Fiber cross connects
OC-12
S
G
S
G
S
S
G
G
S
OC-12
G
Cost Drivers:
OC-12
U
U
U
U
U
•Big OC-12 Direct Circuit
•Cheap Fiber Cross Connects
OC-12
A
A
A
A
A
•Aggregation Efficiency over
OC-12 (2:1,3:1)
OC-12
C
C
C
C
C
•Rack Fees
Cost Formula:
ExchangeModelCost=BigDirectCircuit()+(n-1)*x/2+RackFees()
Cost Comparison at n=5
Expensive OC-3 circuits
for ISP interconnection
replaced with...
A big pipe and...
Inexpensive fiber cross connects
for Interconnection at OC-3 (or any speed)
OC-12
costDCfn()=(n-1)*C/2
C=OC-3 @ $11,400
n=5
costDC=(4)*$11,400/2
costDC=$22,800/mo
S
S
S
S
G
G
G
G
U
U
U
U
A
A
A
A
C
C
C
C
S
OC-12
G
OC-12
OC-12
U
A
OC-12
C
costExchfn()=BDC+(n-1)*x/2+Racks
BDC=OC-12 @ $23,000
n=5, 1 Rack@$1500
costExch=$23,000+(4)(200/2)+$1500 More expensive to use Exchange-Based
Interconnection Strategy at n=5. N>5?
costExch=$24,900/mo
Aggregation of traffic exchange
over big pipes yields
2:1 efficiency increase over direct circuit alternative..
Exchange-based vs. Direct
Circuit Cost Model
At low n, cost of
big circuit is greater
than half-cost
circuits.
$200,000
$150,000
$100,000
$50,000
($50,000)
# of exchange partners
Aggregation kicks in…
efficiency=2:1 (to 3:1)
Dynamics accelerate as BW requirements grow…
Today’s quotes->Monthly savings can get huge
64
61
58
55
52
49
46
43
40
37
34
31
28
25
22
19
16
13
10
7
4
$0
1
Monthly Cost Savings
Steps represent
incremental
circuit growth
req’d for
interconnection.
Cost Savings of Exchange Point Interconnection over Circuit-based
Interconnection Strategy
Exchange-based applying
DWDM over dark fiber
Facilities-based
providers win big!
Cost Savings of Dark Fiber Exchange point ISP
Interconnection
$250,000
$200,000
$150,000
$100,000
$50,000
($50,000)
Aggregation back to net
Number of Exchange Participants
61
57
53
49
45
41
37
33
29
25
21
17
13
9
$0
1
Seamlessly scale BW
within exchange to
other ISPs/CPs
$300,000
5
Seamlessly scale
BW into exchange
Cost Savings compared against direct
circuit interconnects
$350,000
Direct Circuit vs. Exchangebased Interconnection Strategies
Cost Comparison of Interconnection Strategies
$400,000
Monthly Cost of Interconnection
$350,000
$300,000
$250,000
$200,000
$150,000
$100,000
$50,000
# of participants
64
61
58
55
52
49
46
43
40
37
34
31
28
25
22
19
16
13
10
7
4
$-
1
BW Scaling:
DC: Linear
BC: Stepped Linear
DF: Linear Efficient
IX Revenue Generation Potential
S
S
S
S
OC-12 or
Dark Fiber
S
OC-3s
G
G
G
G
G
Transit
Customer
Large
Content
Regional
ISPs
Content
Host er
U
U
U
U
U
ISP Point of
Presence
Int ernat ional
Presence
A
C
A
C
A
C
A
A
Rack Space for
Collocation Customers
C
C
Revenue Projections
Attachment
Speed for
# Transit New Transit
Sales
Customer
6 DS-3
1 OC-3
Revenue to
ISP per New
Customer
per Month
$30,000
$70,000
Monthly
Revenue
from
Participation
$180,000
$70,000
Annual
Incremental
Revenue:
Total Annual
Revenue
from
Participation
$2,160,000
$840,000
$2,900,000
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
Future of the IXP?
ISP
Internet
Service
Providers
Autonomous
Content
Providers &
Aggregators



ISP
Content
Distribution
Hosting
Usenet
E-mail
ISP
Backbone
CP



CP
Component
Service
Providers
Access
Caching
Systems Inc.
Search
Carriers
MarketPlace: Stratification of component operations, fast creation &
provisioning of packaged operations services for resale to customers
Implication: IXP  Content Sources, bandwidth demands
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: [email protected]
Direct Circuit
Interconnect Model
S
S
S
Questions?
S
OC-12 or
Dark Fiber
S
OC-3s
G
G
G
G
G
Exchange-Based
Interconnection Model
Transit
Customer
Large
Content
Regional
ISPs
Content
Host er
U
U
U
U
U
ISP Point of
Presence
Int ernat ional
Presence
A
C
A
C
A
C
A
A
Rack Space for
Collocation Customers
C
C