[AfrICANN-discuss] Issue 474: Africa’s Internet Exchange Points score well on lowering latency and local download speed but did not contribute to lowering of end-user costs, says new study

[Anne-Rachel Inné]

http://www.balancingact-africa.com/Africa’s Internet Exchange Points score
well on lowering latency and local download speed but did not contribute to
lowering of end-user costs, says new study

Those promoting Internet Exchange Points (IXPs) in Africa (and Balancing Act
was one of them) made several broad arguments. They would enable cost
savings as a larger proportion of traffic is exchanged using local rather
than international bandwidth; They would improve access speeds for users and
cut down delays in downloading through reducing latency. They would create
revenue opportunities because they allow easier hosting of local domains and
improved access speeds make certain types of applications possible. Thirteen
years after the first IXP was launched in Johannesburg a research report has
been published assessing their impact.

The purpose of this research entitled “Impact of IXPs – A review of the
experiences of Ghana, Kenya and South Africa” commissioned by OSI was to
look at the evidence for these three different kinds of impact outlined
above. Crucially, whether the cost-savings IXPs may or may not have made
helped local ISPs to pass on price changes to the end-user.

The proportion of local traffic going via a local IXP in Africa varies from
10-60%, depending on the scale of the market involved and the level of
development in that market. Therefore three African countries were selected
that fell at different points of development along this spectrum.

The researchers looked at a combination of the following as measures of
impact: the price to end-users and the views of operators on price
reductions; changes in access speeds; whether local content, hosting and
applications had grown; and other  external which may have had an effect.
The core of the report is three case studies covering Ghana, Kenya and South
Africa.

The conclusions drawn from the three country case studies were as follows:

•    Even where the proportion of local traffic going via the IXP was high,
as in the case of South Africa with 60% in 2008, operators claimed that
savings made in bandwidth costs were insignificant. However, in this case,
the cost savings did benefit Tier 2 ISPs who only had to pay to connect to
one point (the IXP) rather than to several other providers. Where the
Internet sector has been divided, as in Ghana, it has not been possible to
gain the full cost advantages of a unified, single IXP.

•    The original cost saving arguments for IXPs were predicated on there
being a substantial difference between local, national and international
wholesale charges. Since IXPs have been introduced, reductions in SAT3
bandwidth prices mean that in some cases national bandwidth costs may be the
same or more than international bandwidth costs on a distance basis: for
example, in Nigeria, it is cheaper to send traffic from Lagos to Sessimbra
in Portugal than it is to send the equivalent amount of traffic from Lagos
to Abuja. With the arrival of even cheaper fibre capacity in 2009 and 2010,
this closing of prices will be a challenge for IXPs wanting to attract local
traffic. But just as international prices have come down, so local and
national prices will have to come into line with them. For IXPs to remain
cost-effective, ISPs will need to press for lower national bandwidth
charges.

•    Since the retail cost of Internet subscription charges (and cyber-café
access costs) in Ghana and Kenya has fallen since the introduction of IXPs,
it could be argued that whatever cost reductions IXPs made for ISPs, they
were passed on to subscribers or users. But since these reductions were also
made by ISPs that were not IXP members as well, it is unlikely that they
were as a result of savings from IXPs. In South Africa, dial-up charges have
changed little over the past ten years and DSL charges have fallen since
their introduction in 2003, well after the introduction of JINX. Again this
makes it unlikely that any cost savings were connected with the existence of
an IXP. Ghanaian and South African providers argue that cost savings were
passed on to end users in the form of improved quality of service. But it is
clear that cost savings from the IXP process were not passed on to end users
except as part of the wider process of competition between operators.

•    Whilst IXPs may have resulted in cost savings for the end user, the
most significant factors have been: the ending of the international traffic
monopoly (in Kenya), increased levels of competition and dramatic reductions
in international bandwidth costs. For example in South Africa, international
bandwidth as a percentage of total costs fell from 60% in 2003 to 45% in
2008. However, there is a direct link between IXP participants, their ISP
associations and the bringing about of the factors listed above. For example
in Ghana, GISPA has been instrumental in getting a special, low-cost deal on
SAT3 bandwidth and in Kenya, TESPOK was at the forefront of the
liberalisation process.

•    Access speeds appear to have improved but it is difficult to separate
the impact of improved national and international links from the speed
advantage delivered by the IXP. Furthermore, as international bandwidth has
come down in price, end users have had access to faster download speeds.

•    Whilst the volume of traffic going through IXPs in Kenya and South
Africa has increased dramatically, even these increased volumes have to a
large extent been overshadowed by increases in international bandwidth.
Indeed local traffic has fallen as a proportion of overall traffic in South
Africa. There is no traffic measurement at the Ghana IXPs so it is not
possible to say what has happened either in terms of the proportion of local
traffic or the overall growth of traffic at the IXPs.

•    Likewise the growth in local content and its use by end users has been
eclipsed by a much wider interest in international content. As international
fibre has become cheaper, it has been easier for operators to supply
Internet users more cheaply. As a result, the number of people using the
Internet has gone up. Although local content has grown in all three
countries, the majority of use (particularly web mail access) remains
international. For example, Facebook and You Tube are amongst the top ten
sites accessed in African countries analysed by Alexa.com. However, this
growth in Internet use has also benefited a small number of local sites.
IXPs have supported the introduction of new local services and applications:
for example in Kenya, the implementation of online tax reporting by the
Kenya Revenue Authority and the availability of freeware hosted by the
University of Nairobi.

The Impact of IXPs – A review of the experiences of Ghana, Kenya and South
Africa was written by Charles Amega-Selorm, Muriuki Mureithi, Dobek Pater
and Russell Southwood. If you would like a free copy of the report, please
send an e-mail with IXP report as the header and we’ll send one to you.
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