PCH

Best Practices in Internet Regulation

Interconnection

Right-of-Way Access

Regulation of network interconnection and traffic exchange

Successful exchanges are not subject to any sort of licensing or regulatory activity in any part of the world. On the contrary, IXPs subject to regulatory activities are less likely to succeed because they introduce administrative overheads to an inherently technical and simple task, which is allowing the flow of packets from service provider A to service provider B. Of the world’s four hundred exchanges, the only one that we’re aware of that operates under a license is the KPIX in Nairobi, Kenya, and that was because of a misunderstanding on the part of the regulator. Subsequently-established exchanges in Kenya, however, have not required licenses.

An IXP is not, fundamentally, a thing. The parties to interconnection are the ISPs, which may need to operate under a license, but the IXP is simply a place where they interconnect. Drivers may require licenses to to drive their cars on the street, but the street is not required to have a license to be driven upon. It’s merely an unfortunate coincidence that some IXPs are incorporated as legal entities; it’s a bad judgment on their part, but the bad judgment of the few should not be visited upon the many. An IXP certainly should not be assumed or required to have a legal existence, or be a taxable entity, or a regulatable entity, and more than a street should.

From an economic perspective, a licensing process would add transaction costs to the exchange of Internet traffic that will have to be met by service providers and ultimately by end-users and business. In turn, this will make ISPs less competitive and less able to generate profit that can be reinvested in infrastructure and business development.

In terms of time and resources, hat exchange points in their conception and start-up phase are mostly run by volunteer members of the exchange in their spare time. This decision is mostly taken because the exchange point is not a revenue generating business but rather a facilitator of interconnection of business interests. It then makes total sense for their members to keep operational costs of the IXP as low as possible. A regulatory process of licensing, will add rules and requirements that will increase the administrative work required to set up an exchange and hence an barrier to economic development.