Emergence and Performance of Internet Exchange Points: the Role of Network Asymmetry

Abstract: Internet Exchange Points (IXPs) are vital infrastructures which allow networks on the internet to easily interconnect. Case studies have shown that IXPs enhance the quality of internet access, however there is no scholarly literature explaining the conditions that give rise to active IXPs. In this paper, we examine the role played by size asymmetry between leading national internet service providers in the formation and growth of these IXPs. While network externalities and demand for end-to-end internet connectivity give networks the incentives to interconnect, there is also countervailing temptation for larger networks to degrade interconnection quality in their quest to gain a competitive edge. We report on a preliminary large-N analysis of a novel cross-sectional dataset which includes information on network size asymmetry, IXP characteristics, state of broadband development and levels of economic development. We complement the large-N analysis with a narrative case study of the Philippines. We find network asymmetry among national internet service providers to be negatively predictive of IXP development. The policy implication is that market liberalizing efforts that reduce the size advantages of dominant networks will greatly aid the spread and growth of local IXPs.