Paris – A new report by the Organisation for Economic Co-operation and Development (OECD) has provided evidence that shows that the existing internet model works extremely well, boosts growth and competition and brings prices for data down to 100,000 times less than that of a voice minute.

A survey of 4,300 networks, representing 140,000 direct exchanges of traffic on the internet, found that 99.5 per cent of “peering agreements” were on a handshake basis, with no written contract and the exchange of data happening with no money changing hands.

Moreover, in many locations, multilateral agreements are in place, using a so-called route server, where hundreds of networks will accept to exchange traffic for free with any network that joins the agreement.

This has helped drive down prices, in stark contrast to voice traffic exchange, which has been contentious, requires strong regulatory oversight, with contracts between networks sometimes totalling hundreds of pages and expensive computer systems calculating the incoming and outgoing revenues.

The report finds that large content providers and Content Distribution Networks have expanded their networks and peering locations to every corner of the world, for example into Africa.

This has saved them, their customers, and the ISPs they peer with millions of dollars every year, while greatly increasing quality of service. 

Expanding IXPs will keep local traffic local and unburden interregional links and stimulate investment in local networks, says the report.

It is for this reason that the OECD has encouraged countries to develop and use IXPs for more than 15 years.

This model of internet traffic exchange can only exist in an environment that stimulates market entry and investment. 

This requires that regulators allow telecommunication and non-telecommunication operators to enter the market, to compete and to interconnect. Indeed where development of the internet has been less than satisfactory this often stems from a lack of sufficient liberalisation.

Given the enormous difference in performance between the heavily regulated telephony sector and the performance of the internet sector, the report says:  “As incumbent networks adopt IP technology, there is a risk of conflict between legacy pricing and regulatory models and the more efficient internet model of traffic exchange.

“By drawing a ‘bright line’ between the two models, regulatory authorities can ensure that the inefficiencies of traditional voice markets will not take hold on the internet.

“That these “rules of the game” are so ubiquitous and serviceable indicates a degree of public unanimity that an external regulator would be hard-pressed to create.

“The parties to these agreements include not only internet backbone, access, and content distribution networks, but also universities, NGOs, branches of government, individuals, businesses and enterprises of all sorts—a universality of the constituents of the internet that extends far beyond the reach of any regulatory body’s influence,” the report adds.
DD