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Assessment of the impact of Internet exchange points: empirical study of Kenya and Nigeria

Michael Kende Senior Adviser, Consulting

Analysys Mason's study quantifies the economic benefits of establishing Internet exchange points (IXPs) in emerging markets.

Report on impact of internet exchange points (IXPs) on emerging markets       

 

As the Internet becomes increasingly globalised, the interconnection between networks, content providers and users becomes more critical to creating the 'network of networks' that is the Internet. At the center 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.

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 together and exchange domestic traffic, saving on international transit costs while improving performance.

IXPs have already played a key role in the development of an advanced Internet ecosystem in Asia, Europe and North America. The number of IXPs is increasing in Africa, despite the relatively challenging economic and telecoms environment in this region.

Analysys Mason's new study, which was commissioned by the Internet Society, quantifies how IXPs enable Kenya and Nigeria to save millions of dollars in telecoms costs, and raise additional revenue for these countries, while simultaneously speeding up local data exchange, and encouraging the development of locally hosted content and services. Examples of these benefits include the following.

  • 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 nearly USD1.5 million per year on international connectivity charges.
  • In Nigeria, the Internet Exchange Point of Nigeria (IXPN) has achieved a similar reduction in latency, while saving operators almost USD1 million in connectivity costs per year.
  • Nigeria's IXPN has also encouraged the repatriation of financial platforms for online banking that were previously hosted overseas, while Kenya's KIXP has helped to 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 the second quarter of 2011, which has significantly increased the amount of locally distributed content (notably YouTube videos).
  • Improved access to local content has increased usage, helping to increase the mobile data market by at least USD6 million per year in Kenya.

This is a unique study to quantify the benefits of these best-practice IXPs. It demonstrates the central role IXPs have had in developing the ecosystems in each country and paving the way for future growth – particularly in facilitating advanced services, such as cloud applications.

The study puts into clear context the commonly accepted but seldom quantified proposition that IXPs are essential for any country that aspires 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.