The concept of an IP exchange or IPX has been around for several years. In essence, it’s simple. An operator that connects to an IPX is able to hand traffic to other members of that IPX community in a secure, service aware way that enables service quality and billing to be managed end-to-end. The concept cuts the need for one-to-one peering and direct interconnect relationships and provides a platform for carriers to handle traffic for other carriers, over-the-top service providers and even enterprises, guaranteeing service quality throughout the process.
“One of the big differences between having a high capacity connection into an internet exchange and connecting to an IPX is that a best effort approach to your business is fine as long as the streams of traffic can handle delay,” explains John Wick, senior vice president for global network solutions at Syniverse, which launched its global IPX in 2009.
“If you’re simply doing email you can certainly have a best effort internet connection to support your business. What’s difficult is supporting a community with iPhones and tablets and an insatiable appetite for data.”
Adam Janota, director of global networks at Equinix, also sees that challenge. “As iPads and other devices become more and more data-oriented and demand for more and more robust services increases, IPXs will become a new internet because the number of users and proliferation of devices is exponential,” he says.
“I’m sure IPXs will be an important exchange of data because service aware applications like cloud require flexible, almost elastic bandwidth which moves with demand. [IPX helps] operators move into an application aware network and build new products and help them establish value-added services.”
For Dimitri Repinec, senior product manager at BICS, which announced in September that 40 carriers are connected to its IPX, the focus is on being prepared for new business models.
“Our strategy is to migrate everyone to IP and we are preparing ourselves to understand how to implement new business models and new services in 4G. We’re trying to hook up non-mobile operators to this platform and see if we can connect traditional network players with OTT providers,” he says.
The nature of IPX is new and, while parallels can be drawn with roaming exchanges and carrier ethernet exchanges, IPX offers more because it is service aware and billing aware.
“We see ourselves as distinct, not exclusively, by our offering of the full range of services across the IPX,” says John Candish, senior director for IPX Business at Sybase 365. “IPX is service aware, that’s a critical point, but it’s also billing aware and quality aware so it is resolving the billing and quality flows and doing that across all services.”
Being ready for the increase in usage of new, quality sensitive services like video is a prime motivation, says Wick. “It is all about positioning for the ultimate development on the network which is going to be video calling,” he adds.
“Operators need to accelerate their business. An operator might have 15 different interconnect models in play and this model allows them to consolidate those down to one. There is a cost saving to doing this. They also benefit from an [operational] efficiency perspective and in terms of future proofing.”
Candish also sees IPX as the path of the future, whatever that entails. “We’ll certainly see carrier ethernet exchanges used for one type of service but voice signalling or BlackBerry apps need much more control and assurance around them,” he says.
“We make money by the value of the community and the value add above the physical connections [it provides]. Carrier ethernet exchanges generate money from the physical connection but we generate value with our community relations, making billing very easy and with low overheads. If you design it well, it’s low cost to run and, by giving the customer end to end visibility into traffic, you give substantial value.”
That’s what makes IPX an attractive business to many operators. It provides an opportunity to attract carrier competitors and OTTs to their network via an IPX and generate revenue from handling IP traffic in a secure, service-aware way. A race to attract companies to specific IPX offerings has begun because of that.
“It’s a land grab right now,” says Wick at Syniverse, “but there won’t be as many IPX players as there were in the GRX (global roaming exchange) industry. GRX was all about GPRS data: that was much talked about but seldom used, the opposite is true here. Now we have the IPX evolution and 4G which is certainly fast and furious. From my perspective, the devices are ready but where is the network? The users are ready and there is no shortage of them willing to pay a premium.”
Candish concurs: “We’ve got players coming at it from the voice angle, they’re struggling because they’re rebranding IP voice services as IPX,” he says. “There are people coming at it from a very data centric angle, concentrating on IP roaming and data services but not really providing a service-aware layer. All of the above are engaging in a land grab. We see next year as our opportunity to prove the value of the full service offering. Coming to IPX as a new provider, we’ve got no agenda to resist movement of traffic to an IPX, as competitors with signalling or GRX activity might have.”
Of course, as the number of IPX propositions proliferate, the market fragments and the principle of using an IPX to connect to many carriers becomes diluted. The benefits of to a carrier of eliminating interconnect relationships could be eroded by having to connect to multiple IPXs if the situation gets out of hand.
Candish doesn’t see that happening. “We will see IPXs connect to each other next year,” he says. “We’re seeing people build their own communities at the moment but you’ll be able to reach any major carrier by having connections to no more than two IPXs.”
However, the concept of peering-like relationships between IPX communities isn’t straightforward because they define an end-to-end responsibility for the traffic carried. “As an IPX provider dealing with customers, it’s easy to do but, when it comes to peering, my partner — my competitor — also becomes my VIP customer,” explains Repinec.
“The service quality that I’ve negotiated with my customer has to be passed into my peering contract so the challenge lies in how to express and translate those commitments. Is your competitor prepared to take them on?”
He adds: “I’ve been talking to a very few carriers for the last five to eight months to figure out how to do it in a commercial contract. The technology is very nearly 100% there but somehow you need to be able to match those levels of service required and still be able to differentiate from your competitors.”
Henry Bohannon, head of ethernet services at Colt, doesn’t see exchange number proliferating to the extent that their value is diluted. It’s not a challenge to connect to as many exchanges as customers require, he says.
“I don’t see much of an issue with carrier ethernet exchanges proliferating. Their business model is to locate exchanges in carrier hotels and we’re in all the carrier hotels in Europe so accessing them presents no difficulty. If they are a more simple way of interconnecting, then fine. I don’t think it changes our strategy but, if it simplifies it, then it’s a welcome thing.”
Candish sees a fairly well-established technology lifecycle playing out. IPX providers will proliferate before numbers slim down to a natural level. “In the end, there will be five or six major players,” he adds. “That’s enough to have good competition and the number of peering relationships required around that level are economical to manage and deliver value.”
Does this mean the end of the road for carrier ethernet exchanges if IPXs can handle complex services as well as basic peer-to-peer connectivity? No, says Repinec: “One will not win over the other; both will co-exist. The carrier ethernet operator will still have to establish single point and multipoint connections in the carrier ethernet exchange, with IPX an operator will only have to establish the connection once.”
That’s a view shared by Bohannon, who thinks IPX and carrier ethernet exchanges are of most attraction to operators that don’t have high volume direct relationships or are accessing unusual locations.
“Carrier ethernet exchanges definitely open up the market a bit but they offer a parallel stream to direct connections,” he says. “We have more than 200 discrete connections in service and exchanges won’t take away from that. If two partners have high volumes traffic they probably will continue to directly connect. However, the applications that IPXs support are important. One area is around voice interconnection and I can see the value of exchanges that do that specifically, but in general we will see the same sort of patterns with IPX as we are seeing with carrier ethernet exchanges. For us, it’s not just about extending reach; it’s about doing what our customers and want and accommodating how they want to deal with us.” GTB

Further reading from Global Telecoms Business:
Moving to next generation ethernet 24 Oct 2011
IP exchanges solve evolving network issues 24 Oct 2011
IP exchanges become the interoperability hub 28 Feb 2011
Rival exchanges set up for carrier ethernet 12 Dec 2010
IPX: cost savings, flexibility and new services 01 Oct 2010
China Telecom joins ethernet exchange 03 Sep 2010