For what it's worth...I just finished a paper that highlights the trade offs between the direct circuit interconnect model and the exchange point interconnection model for ISPs. The paper discusses the operations and financial models (taking into account the circuit costs, cost of exchange
All is well but you missed one of the most critical issues with the current IXPs: lack of scalability. The private point-to-point interconnects are at least as fast as backbones. Fixing IXP scalability issues requires somewhat radical departure from the current router architecture; such as being done by terabit router vendors. In other words, even if multi-party IXPs are more cost-effective, they are currently (and in the near-term future) unable to handle the load. Also, the number of interconnects (IXPs or direct) cannot be large because of flap-amplification properties of the inter-backbone connections. (BTW, O(5) can be an arbitrarily large fixed number, simply speaking :) --vadim William B. Norton <wbn@equinix.com> wrote: participation, cost of dark fiber, etc.) and the implications of these strategies across the # of interconnection participants and bandwidth utilization between the participants. To cut to the chase, the major points from the paper:
1) For ISP interconnection, direct circuit interconnection is financially attractive for low #s of connections (O(5)) of relatively low bandwidth (DS-3/OC-3).
2) As the bandwidth and # of interconnections grow, the exchange point interconnection model proves much more scalable for two reasons: First, as bandwidth grows between participants, ISPs are able to aggregate interconnection traffic over increasingly large pipe back to their cloud, yielding potentially significant economies of scale. The direct circuit interconnection does not provide for this aggregation since the pipes are destined to different plances.