Starting an IXP - Costs

Introduction

It is not possible to provide specific figures for what the cost of the various elements involved in starting an IXP will be, nor is it possible to consider every funding model, however some general guidance and considerations are included here.

Leveraging suppliers

As discussed elsewhere, many IXPs have started with little or no direct funding, and it is quite possible to provide an IXP that will support perhaps 5 to 10 ISPs entirely from donated equipment and time. As an IXP grows, however, it will usually become necessary for the IXP to purchase its own equipment, rent its own co-lo space etc. An important point when negotiating with suppliers is to use the leverage of the nature of an IXP to obtain preferential pricing. Firstly, if the IXP is not-for-profit this should be made clear to the suppliers; this will normally secure a certain level of discount from their normal pricing. Secondly, and more importantly, suppliers should be made fully aware of the potential marketing benefits that they can accrue from providing equipment or services to an IXP. Whilst the IXP will probably wish to remain neutral and not directly endorse one provider or another, a balance can be made between allowing a supplier to advertise the fact that they supply the IXP and a healthy level of discount.

Budgeting

To establish a budget to work with one mechanism is to consider what is reasonable to ask from the member ISPs in the form of membership fees. Ideally the fees should show a significant financial saving on the cost of upstream transit for the amount of traffic that is expected to be peered at the IXP. However, it could be difficult to achieve this at start up, so the founding members may need to have faith in the growth of the IXP, and invest more than they will save in the short term. If the founding members build an IXP infrastructure that attracts new member ISPs fairly quickly, all parties will see significant savings in the medium term and very large savings in longer term. Obviously this investment must be balanced against what the ISPs can actually afford.

Outside investment

It is possible that investment could be made by parties other than the ISPs themselves. For an IXP with a neutral model however, any commercial investment should be very carefully considered to avoid losing that neutrality. Other non-commercial avenues could also be explored. For IXPs initiated by an institution, the institution itself may be prepared to invest. Government grants may be available; grants or assistance may also be available from local councils, technology funds, or chambers of commerce. Finding and securing this type of investment can be very time consuming, though, and it would appear that to date there are not many examples of IXPs using this type of funding.

Budget items

Having considered the architecture and services that the IXP will provide, and the available budget, a 'shopping list' of required items can be drawn up. Some items to consider for the list are itemised below. Not all of these will necessarily be required at day one, but it may be useful to consider when (or if) they will be required for budgetary purposes. It is not necessarily a complete definitive list, it is possible there will be items to be budgeted for that are applicable to a specific IXP that are not included here. Costs involved in staffing the IXP are not included; a separate section on staffing is below.

Hardware

Switch equipment, racks & fittings, cabling and patching miscellany, web and email server(s), router equipment ('collector', IXP transit)

Co-location and communications

Rack space rental, power, on-site support, out of band telco circuits, IP transit (for the IXPs own infrastructure)

Ancillary

Technical support (where contracted out), hardware and software maintenance contracts, insurance (business continuity, third party liability), legal and accountancy charges, business taxes, office costs (rents, rates, telephone, postage etc), disaster recovery contingency.