Satellite Internet Exchange Points—bringing connectivity to the developing world

A study conducted by “The Economist” magazine, showed a strong correlation between the price of a “Big Mac” in a country and it’s cost of living. The cost of living—rent, consumer goods, food, entertainment is usually significantly higher in the US than in the developing world(and so is the price of a “Big Mac”). However, “Big Mac” index notwithstanding, the price of internet bandwidth in the third world is off the charts. As a point of comparison, a 1 Mbit/sec ADSL costs about $20 for a home user in the US, and about $800 in Pakistan. Needless to say, there is a strong need for a reduction in cost and improvement of quality of service.

The issue with the developing countries is the lack of infrastructure. Our case study of Pakistan showed that all of Pakistan has only one backbone fiber line, resulting in bottlenecks. The lack of redundancy has its costs—in July 2005 the fiber wire got severed resulting in massive outages. The back up satellite connection was hardly a solace to the burgeoning IT industry of Pakistan.

A significant percentage of traffic in Pakistan is domestic, but it’s routed through servers in the US and Europe. A trace route from one Pakistan ISP to another yields a shocking pattern—packets traveling from Pakistan to UK, US, Singapore and back to Pakistan. The situation is exacerbated in the case of fiber failures, when the traffic gets routed over multiple satellite hops. The latency is about 700 milliseconds/hop(or about 1.5 seconds for every transaction). This not only adds latency, needlessly raising costs but chokes the connection slowing down genuine Pakistan to international traffic.

Internet Exchange Point is a facility to allow the exchange of traffic between multiple ISP’s. In general the ISP’s have to pay to the tier-1 providers or the governing body(say Pakistan Telecom Authority) for the carriage of traffic. Even if the traffic is local, without the Exchange Point, the traffic is routed over the international internet.

The peering arrangement allows local ISPs to exchange traffic on a barter basis, rather than on a cash basis—net neutrality being the key. Such arrangements bypass ITU protocol, regarding revenue sharing and allow net lower cost to all the ISP participants.
The exchange point essentially allows the ISP’s to segment the traffic, according to the destination and by pass the tier-1 providers. Results are dramatically lower cost and lower latency.

The entrenched incumbents in developing countries(such as Pakistan) have the most to lose from domestic exchange of traffic and are the biggest impediments to the adoption. The governments of such countries also have a vested interest in supporting the monopoly of Telecom companies, given the revenues and taxes received. The larger ISP’s also have a vested interest in using high cost of connectivity to hasten the exit of smaller or less capitalized players through attrition.

In conclusion, to reap advantage of internet exchange points, the telecom companies have to overcome their monopolistic ways and there has to be an effort to make a neutral body responsible for the traffic sharing facilities. The lower cost of internet will actually foster overall growth in overall traffic, which will compensate the monopolies’ initial loss of international traffic.

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