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  Charge for capacity, not time
Connectivity of Internet networks
Autor: Christian O'Flaherty and Bill Woodcock
When it is said that the Internet is the "network of networks", this is because it was designed to connect the few networks that existed in the late sixties, with the aim of creating a single one. Its name comes from the words Interconnected Networks. The concept of connectivity, on the other hand, explains the extraordinary and astonishing growth of the Internet, which currently consists of tens of thousands of networks that can interconnect with each other.

The efficiency and growth potential of the Internet depends directly on the number of its interconnections: when a network has multiple interconnections, it will have lower costs, better quality and greater availability to carry information. However, if a network is only connected with one that provides the "transit service" to conduct their information to the rest of the networks, it is subject to capacity rules, costs and other conditions set by this single source.

The "transit service" occurs when a network allows traffic from another to pass through its infrastructure on its way to other networks. Transit providers charge smaller networks for this service access to the rest of the Internet.

Thus, a small network can start with a single transit provider, but when its traffic grows, it needs to identify other nearby networks to establish connectivity agreements. This type of agreement is called peering or connectivity between pairs and applies when two networks exchange their own traffic exclusively. The traffic exchanged using these agreements is of higher quality and lower cost than that achieved with a transit provider.

A recent analysis published by Packet Clearing House (1) found that, of four thousand networks surveyed, 99.5% of peering interconnections were established through informal arrangements reached among technicians or network operators, because they are the ones who best recognize the benefits of connectivity. Only when the networks are affected by political or regulatory factors do complications arise in establishing these connectivity agreements, which end up negatively affecting Internet service.


Internet Exchange Points (IXP for short) were established to simplify and promote these interconnections where many networks converge. Thus, a network can connect to an IXP and access all networks that reach the site, thus simplifying connectivity between networks. IXPs can generate additional profits by concentrating links to local networks at a single point. An example is the so-called Content Delivery Network (CDN). A significant proportion of Internet traffic is distributed through CDNs. The big portals and the CDNs install their servers at those points in the network where it is most efficient to deliver traffic to end users.

Another example is the installation of copies of DNS (2) root servers and top level domain server (such as.MX) that accelerate domain name resolution. All these advantages translate into lower costs and a better browsing experience for end users.

Building a simple IXP costs around five thousand dollars, with the most sophisticated not exceeding $50,000. This investment can be amortized over a period ranging from several hours to a few weeks. Its cost, therefore, is not a problem. To be effective, it is necessary to convince Internet service providers that the reason they compete among themselves-rather than cooperating-is that they are located at the bottom of the reseller pyramid.

These service providers require the services of a transit provider in order to sell that traffic at a profit, but without creating additional value.

Instead, if they were connected to an IXP they could cooperate with other Internet service providers (networks) to receive traffic from this new source and selling it to their customers. The challenge is to ensure that Internet service providers understand how this model works and start using the IXP traffic instead of continuing as mere resellers.

In some countries, regulators require that domestic traffic does not leave its borders. That requirement is an excellent pretext to establish an IXP. However, the ideal is that they arise as a result of the economic interest of local networks, since in this way it would boost production of domestic traffic.

The missing link in Mexico

Figure 1 shows the location of traffic exchange points in the world. The more advanced regions have several IXPs and the highest concentration of Internet traffic. This is reflected in lower prices for Internet users in these regions and a much higher quality of service when compared to other regions.

Figura 1

Figura 2

Mexico is the only country belonging to the G-20 and the Organization for Economic Cooperation and Development (OECD) that does not have an IXP. It is also the largest country in the world without an IXP. This includes countries with less infrastructure and fewer resources than Mexico, such as Cambodia, the Congo and Zimbabwe, which do have an IXP.

In South America, there are cases of successful IXPs in Brazil, Argentina, Colombia, Peru, Chile and Ecuador, among others. In addition, there are plans to improve connectivity in Central America by creating IXPs.

To increase cooperation between traffic exchange points in Latin America, their representatives met in May 2011 in Cancun, at the annual meeting of LACNIC, the regional Internet registry for Latin America and the Caribbean. Unfortunately, no representative of Mexico attended this meeting.

It is expected that the new IXP association of Latin America and the Caribbean (LAC-IX) will be formally established the first week of October in Buenos Aires within the framework of the regional meeting of the LACNOG 2011 Network Operators Group ( www.lacnog.org ). In addition to the objectives of cooperation between IXPs, this partnership will support networking groups wishing to establish an IXP, in order to encourage Internet development in the region.

It was already mentioned that one of the major benefits reported by IXP is reducing costs, resulting in better prices for the user. In Figure 2 we can see the average price per Mbps Internet service It compares to Mexico and other nearby countries such as the United States and Canada, and others whose GDP is comparable to Mexico’s, such as Spain, Russia and Turkey.

The price paid by Internet users in Mexico is much higher than in other countries, followed by Turkey, which has one IXP, then Canada, which has two. Among countries with lower prices are the U.S., which has 85 IXPs, Spain with 6, Holland 5, and Russia, which has 14.


The lack of Internet Exchange Points may be associated with the lack of interest in network connectivity in the local market. When regulation of the telecommunications sector does not encourage competition, the market tends to be controlled by a single company, thus preventing the proliferation of telecommunication services, networks and operators and limiting the development of Internet service.

If an entrepreneur wanted to compete in the Internet business, what barriers would he encounter? Would he be able to install fiber optic cable on electric light poles or are those permits granted only to one company? Would he be able to install fiber optics under roads, or would only one company receive permission? Could he secure a block of numbers to assign to his customers, or does only the protected company have local numbers? Can he originate calls terminating in the network of another company, or will those calls will be rejected by the company despite the fact that its subscribers want to receive them? Can he exchange Internet traffic of its customers with the other company within the country, or will the company reject it and thus the traffic exchange take place on U.S.? These entry barriers may be intentional, and limit the amount of service providers and networks. Clearly, governments should avoid them.

Figura 3 To know how many networks exist in the country, we can see how many Autonomous Systems (or network numbers) were assigned to Mexican companies. And if we compare these figures with other countries in the region (see Figure 3) we see that Mexico has fewer networks than Argentina and little more than Chile, two countries with fewer inhabitants than Mexico. In contrast, Brazil has five times as many assigned autonomous systems.

More competition will be reflected in greater number of networks and increased connectivity, which will justify the installation of IXPs so they can become "producers" of local traffic, benefitting not only users in Mexico but throughout the region.

There is a huge economic difference between making or buying traffic, as does Mexico, from an exporter of traffic such as the United States, Germany or the Netherlands. Part of the money that Mexican users overpay goes to the local provider and the rest to U.S. companies. Why does Mexico export all that capital needlessly when it can be a producer of regional traffic, exporter of traffic to southern neighbors and importer of capital?

Christian O'Flaherty works in the area of Regional Internet Development for Latin America of the Internet Society (ISOC), an international non-profit organization founded in 1992 to lead the development of Internet standards, education and policies. ISOC is dedicated to ensuring the development, evolution and use of the Internet for the benefit of everyone in the world. oflaherty@isoc.org.

Bill Woodcock is research director of Packet Clearing House (PCH), non-profit institution based in California, USA. He has participated in the establishment of over a hundred Internet Exchange Points (IXPs) in Europe, Africa, Asia and America, woody@pch.net.


  1. Nonprofit research institute based in San Francisco, California, ( http://www.pch.net/resources/papers/peering-survey/PCH-Peering-Survey-2011.pdf )

  2. DNS: Domain Name System (Domain Name System). This is the mechanism used on the Internet to use names instead of numbers to access information (Example: "politicadigital.com.mx")
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