The Internet works in mysterious ways. Most people are unfamiliar with how the data they consume gets to their computers except to say it’s got something to do with bytes and they’d like it mostly for free, thanks. In fact, ISPs typically pay each other to send traffic between themselves. Given the volumes of data, which can reach into the terabits (thousands of GBs) or more, that can get expensive. But a Canadian expansion of the Internet’s unseen “nervous system” in the form of Internet Exchange Points (IXPs) aims to reduce that cost.
There are currently two IXPs in Canada, TORIX in Toronto and OTTIX in Ottawa. The Canadian Internet Registration Authority is currently leading the push to establish several more across the country. While the incumbent telcos like Rogers (disclosure: Rogers owns Canadian Business Online), Telus and Bell already exchange traffic directly and in some cases do participate in IXPs, the exchanges primarily cater to smaller, independent ISPs.
The business value is simple. If ISPs can route more of their traffic to each other locally, rather than having it travel to an exchange, say, in Chicago or Seattle, before coming back to Canada, operating costs are reduced and network efficiency improved. This gives ISPs more flexibility to lower access prices for end users and provides faster Internet response times, especially for content and applications like video and Skype.
Bill Sandiford, president of Oshawa-based Telnet Communications, says 35% of the traffic that leaves his ISP’s network goes through the Toronto exchange, which he says translates into a 35% reduction in what are called “transit costs.”
An IXP is a physical location comprised of server racks and a “switch” (a device made by Cisco). How the process works is that participating ISPs and large content providers agree to “exchange” traffic such that the costs that would normally be associated with paying another ISP more or less zero out (called a “settlement-free exchange”). Unlike the commercial exchanges run by third parties or direct network connections such as between big, incumbent ISPs, there is generally no money spent beyond setup, membership and maintenance fees. It’s a solution that allows smaller ISPs to remain competitive despite lacking the scale of the incumbents, and that’s good for the competitive landscape. The Toronto exchange hosts about 160 participants, of which 80 are independents, with more in the pipeline, according to TORIX president Jon Nistor.
Ironically, it’s a lack of competition that until now slowed down the growth of IXPs across the rest of the country. For example, while Rogers and others like Videotron, Shaw and Sasktel participate in the settlement-free exchanges, both Telus and Bell do not. Neither company will reveal why, but it seems possible they see their traffic as valuable enough to demand payment for it. “Fundamentally, we have a long and rich telco history which has put pipes in north-south, which has had some very strong incumbents and they’ve continued to do what they do well, which is the way they’ve always done it,” explains a rather diplomatic Byron Holland, president and CEO of CIRA. “And because they tend to have one-to-one private arrangements there hasn’t been a real push for Internet exchange points.”
Nevertheless, CIRA is talking to potential participants in Vancouver, Calgary, Edmonton, Winnipeg, Montreal and Halifax about setting up exchanges and, for its part, providing administrative support. Montreal is closest to launch and Holland says Manitoba and Winnipeg should be live within six months. The cost to launch these exchanges varies widely, but Telnet’s Sandiford expects the Montreal exchange will come in at around $100,000.
“It’s one of those things that only seems to function well once it has a little bit of critical mass,” he says. He notes that when the Toronto exchange launched over a decade ago, it had very little traffic and it was worth it to Telnet only because it was free. “But then it grew and some of the bigger players came online—the Akamais and Limelight Networks of the world—some of the big content delivery networks. So the idea is you want to get as many founding members as possible because it gives the exchange a better seed.”
CIRA is certainly cognizant of this reality and says it will continue to reach out to incumbent telcos. Holland recites the cost and efficiency benefits before adding, “We certainly hope that incumbents will be part of the ecosystem. … With this kind of innovation everybody comes out a winner.”
If it means a better Internet for the rest of us, I’m all aboard.