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Re: Do ATM-based Exchange Points make sense anymore?

  • From: William B. Norton
  • Date: Thu Aug 15 11:10:48 2002

Hi all -

I have walked about 30 people through the "Do ATM-based Internet Exchange Points make sense anymore?" white paper and have received some really good feedback, suggestions and price points to calibrate the Peering Financial Model. I have applied these calibrations and I am ready to release the paper for wider review, but I'd like to share first the assumptions and calibration points for the model along with a few of the more interesting observations.

The Business Case for Peering at an ATM-based Internet Exchange Point Peering looks pretty dismal in todays market. As I mentioned in an earlier message, the dominant issue is that transit and transport have dropped dramatically,while the cost of ATM-based peering has not dropped in kind. In todays market (from quotes shared with me) we see:

Assumptions and Calibration Points
Transit $125/Mbps with 500Mbps commit, $100/Mbps with 1000 Mbps commit.
Transport (DC-ASH) $2500/mo for OC-3, $5000/mo for OC-12
Eth-IX fees: $2500/mo for 1/2 rack and FastE, $5000 for 1/2 rack and GigE
Eth Framing Overhead: 6%
HDLC Overhead: 4%
ATM-IX fees: $11,000/mo for OC-3, and $26,000 for OC-12 transport and Port
ATM cell tax: %20
Effective Peering Bandwidth=75% average utilization of available bandwidth
(this means we assume that ISPs (for policy reasons) upgrade the peering infrastructure when the average utilization is 75%)

These numbers are empirical and based on averages from the Internet Operations Community. The paper footnotes the sources.

When these numbers are plugged into the Peering Financial Models, we see that OC-3 ATM-based peering is "Effective" (less expensive than transit) for the very narrow range of 88Mbps-90Mbps. If an ISP can't send at least 88Mbps over the OC-3 to the ATM-IX, it would save money by simply buying transit. At 90 Mbps the OC-3 ATM must be upgraded. This narrow range leads me to believe that OC-3 ATM peering is simply not cost effective. Under the same assumptions (OC-3 into FastE IX), the Fast Ethernet-based Effective Peering Range is 40Mbps-70Mbps, a more reasonable range for medium scale peering.

Applying the model to the ATM-OC-12 we see the Peering Breakeven Point is 260Mbps; if you don't send at least 260Mbps to the peering population then you should prefer simply to purchase transit. This peering infrastructure scales to 375 Mbps at which time it must be upgraded. In this Effective Peering Range the cost of traffic exchange ranges from $100/Mbps down to $69/Mbps when the Effective Peering Bandwidth is fully utilized.

The same analysis applied to Gigabit Ethernet shows a much lower Peering Breakeven Point (100Mbps) with a broader range, scaling up to 448Mbps before the OC-12 must be upgraded, at which point the cost of peering traffic exchange is $22/Mbps.

The bottom line is that the cost of the ATM Peering infrastructure, and the dropping price of transit and transport, have conspired to destroy the value proposition of ATM-based Internet Exchanges. Ethernet-based IXes are less expensive and have a broader "useful life", defined in this paper as "Effective Peering Range."

As I walked folks through this paper I got the sense that most folks had not done this analysis and we opened some eyes here. Thanks to those who provided the empirical HDLC, ATM, and ethernet overhead figures. Including these provides a more fair comparison between ATM and Ethernet-based IXes.

If you would like a copy of the paper please send e-mail to and I'd be glad to send you a copy. As always, I'd love to hear your feedback; that is how these papers become valuable resources for the community.

Thanks -


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