The presence of Internet Exchange has been growing in Indonesia for over 10 years. In 2016, an Internet Exchange Point (IXP) in Indonesia was the third biggest Internet Exchange Point in the world and had helped Internet service providers save costs up to 4,4T rupiah per year. Until today, Internet Exchange Points have facilitated internet service providers (ISP) to save costs and provide lower subscription fees for their users.

The Definition of an Internet Exchange Point

An Internet Exchange Point (IXP) is a physical infrastructure where carriers, Internet Service Providers (ISP), content delivery networks, web enterprises, hosting companies, and cloud providers connect locally. An Internet Exchange Point allows its participating members to interconnect directly and exchange Internet traffic through peering instead of relying on third-party networks to carry the traffic across the Internet for them.

Although various in size and complexity, an Internet Exchange Point basically contains routers, servers, and one or multiple network switches that route traffic between the networks of its members. To fulfill its purpose, Internet Exchange Points have to be placed in a neutral location and are usually spread across countries to enable local networks to efficiently exchange traffic.

The Importance of Internet Exchange Points

Internet Exchange Points are important because their presence helps strengthen local Internet connectivity. The convenience of exchanging traffic with other Internet Exchange Point members enables network companies to shorten the distance a group of data should travel from its source to its destination, keeping the traffic local, resulting in reduced latency and improved round-trip time. Internet Exchange Points also allow better access stability and continuity through their capabilities to redirect Internet traffic when there are connectivity problems on the network. By providing more-direct and speedier network connections, Internet Exchange Points improve the quality of access for local content producers and consumers.

Another benefit of using Internet Exchange Points for network companies is reduced operating costs. Using various methods, the members of Internet Exchange Points can share the costs of maintaining the physical infrastructure and associated services. These members can also save costs by ensuring that traffic between local senders and recipients use local connections which are relatively cheap, rather than international links. Lower operating costs mean more affordable Internet access costs for a greater number of the Internet Exchange Point’s local Internet users.

Because of what they offer, Internet Exchange Points are essential in the development of the local Internet ecosystem and triggering more business innovation and opportunities, thus improving competitiveness. The existence of an Internet Exchange Point in a local environment attracts various associated services, such as domain name servers and content and Web caches. When these kinds of services are localized, they reduce bandwidth requirements and improve the speed and reliability of the Internet access for local users. These improvements work as a motivation for local developers to produce and deliver more relevant local content and applications which leads to better online experience for local consumers. All in all, the whole process makes the Internet more socially and economically beneficial to an area, a city, and a country.

The Different Kinds of Internet Exchange Points

In most cases, Internet Exchange Points are run and managed by a group of parties which will benefit from the existence of the Internet Exchange Points. Some Internet Exchange Points are commercial, and some are for non-profit purposes. However, the key point of the ownership and management of an Internet Exchange Point is its neutrality. 

In general, there are five categories of Internet Exchange Points based on their purposes and management style:

1. Internet Exchange Points managed by non-profit organizations

2. Internet Exchange Points managed by formal and informal associations of ISPs

3. Internet Exchange Points sustained by research centers, universities, and government bodies

4. Commercial companies

5. Internet Exchange Points provided by colocation providers such as NeuCentrIX

To maintain its neutrality, an Internet Exchange Point cannot be owned by its members. This also means that an Internet Exchange Point should not compete with its members or customers in any activities including business opportunities.