There are many folks making the argument that the country doesn’t have enough carrier exchange points. An exchange point is a physical location where multiple carriers meet for purposes of exchanging traffic.
The idea of exchange points started in the late 1990s as a result of the Telecommunications Act of 1996. That new law allowed for voice competition, and the national voice network was controlled by regulated telephone monopolies. Big telcos like Verizon and the other Baby Bells resisted the idea of competition and made it challenging and expensive to connect to the public switched telephone network at their voice switches. This prompted the formation of CLEC hotels, which were essentially data centers near the large telco switches where competitive carriers could make connections with each other.
Over time, broadband grew to be far more important than voice, and became the focus for the desire to interconnect. Over time these same locations were renamed as carrier hotels or Internet Exchange Points (IXPs). The exchange points attracted last-mile ISPs, cellular carriers, middle-mile and long-haul fiber providers, corporate networks, and eventually, content delivery networks (CDNs) from companies like Google and Facebook. The CDN category has grown to include those who are exchanging AI traffic.
I don’t know if this is an accurate statistic, but I’ve heard several people claim there are fourteen or fifteen states that don’t have a major exchange point. This might be true if you use the definition of an exchange point to be a place where everybody meets. The major exchange points are in or near to major cities and include places like 60 Hudson Street in New York City and the Internet exchange point in Ashburn, Virginia.
The major exchange points only make sense for large carriers that are exchanging large amounts of traffic. I recently saw that in the 60 Hudson IXP in New York City that it costs $1,000 per month just to carrier traffic from one floor to the next inside the facility. Only carriers with economies of scale can justify the high cost of locating at the major IXP sites. Most IXPs are owned by somebody other than carriers and ISPs and are viewed as a real estate investment.
There is a big downside to ISPs that are not located close to an IXP. They must lease fiber transport with somebody that can carry their traffic from the local market to the nearest IXP. Such transport can be expensive, particularly for small ISPs who must buy such transport from the telcos or cable companies they are competing against. Lack of affordable connection to the Internet is one of the factors that stop ISPs from creating connections in remote rural areas far off the beaten path. It’s interesting that the BEAD grants want to fund the last-mile networks in such remote places but are not willing to find any significant middle-mile fiber needed to make the connection to affordable transport.
There are good arguments to be made for the creation of smaller IXPs that are closer to where ISPs operate last-mile networks. One benefit of more points is peering, which is the process of routing traffic in a way that avoids having to send it through the major Internet IXPs. An ISP might create a peering point to directly connect to somebody like Google or Facebook to exchange traffic. Peering saves on transport costs, but it also saves on paying a fee to exchange traffic at the big IXPs, which is charged per megabit. For most ISPs, more than half of their data traffic goes to and from a handful of companies like Google, Meta, Amazon, Netflix, and Microsoft.
Perhaps the biggest benefit for ISPs to meet other carriers close to home is the ability to create redundancy. ISPs have learned that it’s dangerous to send all Internet traffic to a single connection point. A fiber cut or electronics failure along that route means the ISP and its customers will go dead. Regional IXPs open up the possibility of routing traffic to multiple large IXPs.