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Content is king, but…

who rules?

Is an open Internet @ risk?

IP Interconnection trends from a

hybrid hosting provider perspective

Bart van der Sloot Managing Director LeaseWeb Network May 19, 2016

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Overview

1. Introduction – why care / why now?

2. About us

3. Quality versus costs – the art of traffic routing…

4. IP Interconnection: trends to worry about

5. Mitigation strategies

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Why care? / @Home:

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Why care? / @Work Content:

Can you compete?

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Why Care? / @Work IX:

Will you become a niche platform

serving small ISPs and small content

providers?

@

?

@

?

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Why Now?

Ziggo – Vodafone NL merger

Source:

What can we learn from the EU remedies in the LGI –

Ziggo acquisition?

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Overview

1. Introduction – why care / why now?

2. About us

3. Quality versus costs – the art of traffic routing…

4. IP Interconnection: trends to worry about

5. Mitigation strategies

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ABOUT LEASEWEB

• Founded in 1997 in the Netherlands

• Hybrid Infrastructure as a Service (IaaS): • Dedicated Servers & Colocation

• Public and Private Cloud services • Storage

• Content Delivery Networks

• Combined with Internet Connectivity • 16 Data Centers (EU, US, Asia)

• ~75.000 servers

• ~320 employees worldwide, ~250 in EU • Generating 2.5 Tbps of Internet traffic • 3 x 100G ports @ AMS-IX

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CUSTOMERS

• PaaS and SaaS

• OTT Video and Audio content

• E-commerce

• Online gaming

• Cybersecurity

• Web analytics and intelligence

• Enterprises

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Overview

1. Introduction – why care / why now?

2. About us

3. Quality versus costs – the art of traffic routing…

4. IP Interconnection: trends to worry about

5. Mitigation strategies

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IP Interconnection options

1 of 5:

IP Transit

Core Routers LSW Server Rack Transit Provider 1 Transit Provider 2 Transit Provider N LSW Server Rack LSW Server Rack Transit Provider 1 Transit Provider 2 Transit Provider N Core Switches LeaseWeb NL – AS60781

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IP Interconnection options

2 of 5: Local

Private Peering

Core Routers LSW Server Rack Transit Provider 1 Transit Provider 2 Transit Provider N LSW Server Rack LSW Server Rack Transit Provider 1 Transit Provider 2 Transit Provider N Core Switches Local Private Peers

LeaseWeb Global Network – AS16265

Peering Core Routers

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IP Interconnection options

3 of 5: Local

Public Peering

Core Routers LSW Server Rack Transit Provider 1 Transit Provider 2 Transit Provider N LSW Server Rack LSW Server Rack Transit Provider 1 Transit Provider 2 Transit Provider N Core Switches Local Public Peers AMS-IX Local Private Peers

LeaseWeb Global Network – AS16265

Peering Core Routers

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IP Interconnection options

4 of 5:

Remote

Private Peering

Core Routers LSW Server Rack Transit Provider 1 Transit Provider 2 Transit Provider N LSW Server Rack LSW Server Rack Transit Provider 1 Transit Provider 2 Transit Provider N Core Switches Local Public Peers AMS-IX Local Private Peers Remote Private Peers

LeaseWeb Global Network – AS16265

Wavelength services to other cites

Peering Core Routers

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IP Interconnection options

5 of 5:

Remote

Public Peering

Core Routers LSW Server Rack Transit Provider 1 Transit Provider 2 Transit Provider N LSW Server Rack LSW Server Rack Transit Provider 1 Transit Provider 2 Transit Provider N Core Switches Local Public Peers AMS-IX Local Private Peers Remote Public Peers E.g. PLIX Remote Private Peers

LeaseWeb Global Network – AS16265

Wavelength services to other cites

Peering Core Routers

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Traffic routing considerations

1. Quality

Latency, packet loss during peak hours

Both inbound and outbound traffic

2. Cost per Mbps

3. Flexibility to cope with traffic volume swings 4. Importance of NOC-to-NOC contacts

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Overview

1. Introduction – why care / why now?

2. About us

3. Quality versus costs – the art of traffic routing…

4. IP Interconnection: trends to worry about

5. Mitigation strategies

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IP Interconnection in Asia

• IP Interconnection • IP Transit

• Public peering in Singapore (Equinix) and Hong Kong (HK-IX) • Various private peerings

• IP Transit pricing >4x Europe

• Challenge: Inbound traffic via US • Peering: OK if remote, not local

(so the customer suffers…), rather formal approach

• “China Direct” in HKG:

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IP Interconnection in the US

• IP Interconnection • IP Transit

• Public peering in NY, Ashburn, Chicago, San Jose, LA,

Palo Alto, Atlanta

• Various private peerings

• Until early 2015: Comcast, AT&T hard to reach via Transit,

paid peering pricing > 3 x IP Transit pricing

• April 2015: FCC Open Internet Ruling– resolving peering

capacity constraints between Tier 1 networks (Cogent, Level 3) and dominant Access ISPs (Comcast, Verizon,…)

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IP Interconnection in the US

204. Broadband Internet Access Service involves the exchange of traffic between a last-mile broadband provider and connecting networks. The representation to retail customers that they will be able to reach “all or substantially all Internet endpoints” necessarily includes the promise to make the interconnection arrangements necessary to allow that access. As a telecommunications service, broadband Internet access service implicitly includes an assertion that the broadband provider will make just and reasonable efforts to transmit and deliver its customers’ traffic to and from “all or substantially all Internet endpoints” under sections 201 and 202 of the Act. In any event, BIAS provider

practices with respect to such arrangements are plainly “for and in connection with” the BIAS service. Thus, disputes involving a provider of broadband Internet access service regarding Internet traffic exchange

arrangements that interfere with the delivery of a broadband Internet access service end user’s traffic are subject to our authority under Title II of the Act.

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IP Interconnection in Europe

• IP Interconnection • IP Transit

• Public and private peering in Amsterdam, Frankfurt, > 15

other cities

• In many countries all ISPs support settlement free in-country

or remote private and public peering

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ISP

CN TP

Settlement free peering (CDN)

Transit Services /

Content Transit/Peering Access ISP

Europe – good examples

• Allows full independence of decision for Content network

and Access ISP

• IP Transit market very competitive, keeps all others in

check.

Transit

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Europe:

Dominant ISP’s in some large EU countries (DE, FR, SP):

• Don’t support local settlement free peering with content

networks, only paid peering or IP Transit

• Operate their own international IP backbones • Offer remote IP Transit or paid peering

• Enforce “traffic ratio’s” to allow settlement free peering

• Restrict peering capacity with Tier 1 networks to force payment

(…packet loss, traffic restrictions in Tier 1 IP Transit services, separate excessive pricing).

• Effective cost/Mbps for paid services

up to 4 x higher

• Behavior now spreading to other

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AP CN TP Paid Peering CDN Peering Services /

Content Transit/Peering Access ISP

Europe – concerning examples

• Consumer: degraded user experience

• Content network: pushed to peering at uncompetitive pricing • Transit Providers: pushed to buy from peers or be evicted

from destination

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Why – to cover capex?

“ISPs do all the investments in broadband infrastructure and content networks get a free ride”

BEREC report BoR (12) 130 (sources: WIK, ARCEP, AT Kearney, Cisco, annual reports Telecom Italia, Orange, Arthur D. Little):

“Taking together the evidence provided above BEREC considers that the expected

volume increase will not require a significant CAPEX

increase in fixed network. There is no evidence that cost are skyrocketing because of traffic increases. In fixed networks usage-based costs - accounting for 10-15 % of total costs for fixed broadband networks – are roughly stable. Thus, if technological progress leads to cost improvements (on a per unit basis) which outweigh the increase in traffic volumes then there would be no negative effect on the overall cost position of a network operator.”

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Why – to cover capex?

“ISPs do all the investments in broadband infrastructure and content networks get a free ride”

“Free Ride…?”

Both content networks/hosting providers and access ISPs/ telecom companies spend 15-20% of revenues in capital expenditures to cope with growth.

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Why – to compete with OTT services?

Source: annual reports

versus

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Consolidation in Access ISPs

90% market share with 2 providers

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Concentration in content

67% of content

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Impact on competition & innovation

• IP Interconnection costs have a huge impact on the

cost to run a Content and Application Platform (>50% for Content Delivery Networks).

• IP Interconnection costs will triple if “Europe

becomes like Germany”

• IP Interconnection costs will become prohibitive

for the business case for new OTT services –

especially for broadcast grade HD/UHD services.

• Deliberate capacity restrictions in IP

Interconnections are a threat to critical real time services.

Peering dispute between a connected car platform and a mobile network?

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IP Interconnection in Europe

Conclusions

• Ongoing consolidation in Access ISPs

• Some dominant ISPs tend to access to

monopolize and monetize their customer base

by charging both content networks and Tier 1

Backbones for IP Interconnection and

restricting peering capacity to enforce this

• This leads to quality degradation for the

consumer and increased costs for content and

application providers

• This represents a threat to innovation and an

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Overview

1. Introduction – why care / why now?

2. About us

3. Quality versus costs – the art of traffic routing…

4. IP Interconnection: trends to worry about

5. Mitigation strategies

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Options

1. Long term IP Interconnection agreements that make economical sense

2. Influence regulation

Influence Parliaments, EU DG’s, Commissioners, Ministries, Regulators…

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Options

3. Create consumer awareness

…but works only if consumers have a choice in broadband ISPs….

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Overview

1. Introduction – why care / why now?

2. About us

3. Quality versus costs – the art of traffic routing…

4. IP Interconnection: trends to worry about

5. Mitigation strategies

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LeaseWeb position

LeaseWeb is a strong supporter of an open Internet in

which ISPs provide uncongested Internet access to their

customers and where traffic between

content/applications and eyeballs in a country is

exchanged on a settlement free basis, enabling

innovation and competition.

Policies that restrict settlement free interconnection

capacity between content/applications and eyeballs in a

country, or between Tier 1 networks and ISPs operating

international backbones, are a threat to competition,

innovation, the eyeball’s Internet experience and

realtime/critical IoT applications.

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LeaseWeb actions

1. Keep negotiating IP Interconnection agreements that make economical sense – and with some that works well!

2. Influence EU regulation through partnerships and associations.

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So…

@Home: >200Mbps line speeds are nice, but make sure your ISP does not restrict IP Interconnection capacity “in the back” (e.g. check speed indices of NetFlix/Google, check Tweakers, forums etc.).

@Work: if the cost or quality of content and

applications (or the underlying platforms) are at risk, step up, consider your options and take action.

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Thank you!

Bart van der Sloot

b.vandersloot@network.leaseweb.com

(join us at the LeaseWeb Tech Summit,

June 2, Amsterdam, “Design for Scalability”

http://www.techsummit.io/amsterdam/,

References

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