NANOG Panel Discussion: Are Transit Exchanges and Peering Exchanges SelfDifferentiating

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NANOG Panel DiscussionAre Transit
Exchangesand Peering ExchangesSelf-Differenti
ating?

• Toronto
• June, 2002

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Keith MitchellChief Technical OfficerXchangePoin
tPhilip SmithChair, APNIC Internet Exchange
SIGBill WoodcockResearch DirectorPacket
Clearing House
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• Background white-papers for this discussion
• www.pch.net/documents/papers/transit-exch-peering-
  exch
• /NANOG-02.06-peering-trans.html
• /nanog-asia-ix.ppt
• www.xchangepoint.net/info/Xchange-Nanog25.ppt

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Assumptions Observations

• Old belief All exchanges are functionally
  similar, differing principally qualitatively.
• Old belief People go to exchanges to peer, but
  buy transit at their own location or within a
  colocation facility.
• However Some exchanges are vastly more expensive
  than others, and provide services which are
  economically unsupportable within a peering
  economy.
• And Many parties buy and sell transit within
  exchange facilities, either over crossconnects or
  through the switch fabric.

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Hypothesis

• There are actually two poles toward which
  exchanges can be optimized peering or transit,
  and they pose very different economic and
  provisioning requirements.
• It may not be possible to meet both requirements
  with maximal success within the context of a
  single exchange.

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Exchange Points and Aggregated Risk

• Redundancy is never necessary on a peering path.
  Full aggregation benefit may be extracted from it
  without danger, since the redundant transit path
  provides a safety net.
• Transit contains full routes, including those not
  learned through peering, and constitutes a sole
  means of reaching most destinations. It thus
  requires redundancy and reliability. Aggregation
  benefits cannot be fully realized on a transit
  link.

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Peering Exchange
Transit Exchange

• Maximization of aggregation benefits suggest
  that
• exactly one peering exchange exist in a region,
  and
• that it include all available peers.

• Reliability by dint of redundancy suggests that
• two or more transit exchanges exist in a region,
  and
• that each can operate competitively with no more
  than three buyers and three sellers.

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Peering Exchange
Transit Exchange

• Aggregation suggests that peers should be
  reached through the switch fabric, up to the
  limit of the capacity of the fastest available
  switch port.

• Reliability suggests that if only a couple of
  transit relationships are needed within an
  exchange, direct interconnections are the best
  means of facilitating them.

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Peering Exchange
Transit Exchange

• Maximum benefit is reached at the lowest price.
• The price is bounded by the additional cost of
  accommodating otherwise-peered traffic through
  transit during peering exchange downtime.

• Maximum benefit is reached at the highest
  reliability.
• The price arbitrages the difference between the
  sum of the market sale price plus backhaul and
  the cost of transit delivered at the customer
  premises.