Make the Future Different

THE CASE FOR A TRUE NATIONAL INTERNET EXCHANGE

FOR THE PHILIPPINES

Background
Currently 15% - 23% of all internet traffic is domestic. Domestic traffic originates in the
Philippines and terminates in the Philippines. The origin and destination may be as far
away as across the country or as close as across the street from each other. However,
instead of remaining local, 40% - 70% of this “local traffic” is being sent out of the
country to Hong Kong or LA before returning.

Customers suffer delays and time outs on their applications and games
The lack of a proper Internet exchange means that accessing and interacting with local
web sites and the performance of many applications and games can take more than
twice as long as it should. This is a result of the long “round trip” the information has to
take to go to the U.S. (primarily) before return to the Philippines. In other cases, the
traffic is routed locally but due to the insufficient local bandwidth the local delays can
result in even longer delays or “time outs”. It also makes the country dependent on
international cables. As was experienced during the major international cable break in
2008, even access to local sites, government websites and local email can be
disrupted. International cable diversity has significantly improved over the past two
years. However, internet traffic has also exploded and with it the dependency of
business, commerce and personal communications on the internet has similarly
increased.

Telco’s can save costs.

Some “peering links” do exist between telco operators but these tend to be relatively
small and congested. A proper Internet Exchange allows internet traffic, particularly
local traffic, to flow without delay or diversion over the shortest route. Instead of
connecting locally, carriers are paying for international bandwidth they don’t need.
Even though international bandwidth has become cheaper, a true exchange reduces
costs for the carriers. It is still far more expensive to pay for international bandwidth than
to connect locally.

The lack of an Internet Exchange continues to cost the country foreign

investment and job creation
The current situation is a disincentive for foreign companies or providers to locate their
websites, services and businesses in the Philippines. The reason for the disincentive is

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that the network connecting servers and services in the Philippines are slower and more
congested than the international connections. Therefore if companies locate their
servers in the Philippines even their local customers will experience more delays than if
they located their servers and services in the U.S.! Several examples exist where a
hosted application provider moved their servers to the Philippines to get better response
time, only to face an angry customer after several weeks of slower and degraded
performance!

No significant cost is involved

In terms of cost, what is mainly required is for all participants to bear their own
equipment costs to support their network traffic. This is mainly made up of common IP
routers and switches. In fact, the more equipment required the bigger the international
bandwidth saved. In general, the payback for any incremental equipment should be
three to six months or less.

The “myth” of “we will cooperate but others will not”

A broad spectrum of industry players agree that the lack of a true National Internet
Exchange is a significant problem that is holding back the industry, investment and
customer experience. There is also broad agreement that it can be fixed relatively
easily. Many of the players assume that although “they” are willing to cooperate others
will not. However, the many of the “others” also assume the same!

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What is required is a clear set of principles

The main requirement is that the principles of a proper Exchange be followed.

These principles are:

- Neutral: The location and operation of the exchange should be neutral to all
parties.
- Transparent: The rules and operation of the Exchange should be public and
transparent.
- Open: The exchange must be open to all qualified ISP’s/telco’s.
- Independent: The exchange will run independent of its members and each
member must independently bear their own cost.
- Not for Profit: The exchange exists and is run on a not-for-profit basis. (Each
member bears their own cost plus a portion of the relatively moderate
administrative costs)

The solution Does require Leadership

The Internet Exchange “market” in the Philippines is fragmented. There are several
existing exchanges (PHIX, PHOpenIX, CORE and MIX). No current exchange has the
full and open participation of all the major ISP’s/telco’s. In addition, none meets all the
principles of a “true” national exchange. The requirement is for companies to link their
own benefits to that of the industry as a whole, the economy and the Philippines as a
country. Benefits will accrue to all sectors and all parties. However, the bigger the
network, the bigger the benefit. The more a company participates the more they will
benefit. This is a true opportunity for a “win – win” situation.

Next Steps
 Contact and introduce all the major potential participants to the concept. This
includes carriers, ISP’s, key members of the IT industry and relevant government
agencies – June/July 2010.
 Obtain input and feedback - July 2010.
 Convene meeting to present concept and obtain industry-wide support – Aug 2010.
 Sub-team meeting on Standards, Technical Specifications, Operations & Procedures
and Governance – Aug/Sept 2010.
 Finalized implementation plan – Sept/Oct 2010.
 Implementation & Testing – Nov 2010.
 Go Live – Dec 2010.

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