IXP in Latin America: Low cost internet at higher speed

In Latin America, the use of Internet has been growing in the past decade. Toward the end of 2012, there were 256 million users, which is equivalent to a penetration of 44.7 percent. The consumption of Internet traffic per user has also accelerated: in the region it has increased by 62 percent in past years, while the global level grew by 42 percent. 

Most of the traffic generated in Latin America must travel through international connections with the United States, due to the scarce capacity of the local or regional interconnection existing in the region. It is important to develop an interconnection infrastructure in Latin America that helps reduce the costs for the final user and increases the speed of data transmission. The use of the IXP (Internet Exchange Point) represents this alternative: these points allow Internet service providers to interconnect without the need to use international circuits, reducing the costs of wide band and, as a consequence, their prices.

The study Expansión de infraestructura regional para la interconexión de tráfico de Internet en América Latina (Expansion of regional infrastructure for the interconnection of Internet traffic in Latin America) (CAF, 2014) presents an analysis of the potential of the IXP that may be used in the region. Mauricio Agudelo, CAF's Principal Executive, explains that currently, 49 percent of the Internet traffic is international, of which 85% is destined to the United States; in addition, approximately 14 percent of the Internet traffic to the United States represents communication flows between countries of Latin America. "This increases the service costs and affects the speed of the connection to Internet".

Agudelo states that although there are some experiences with local IXP, mainly in Brazil and Argentina, and soon in Mexico, there is still a lack of the necessary development to substantially improve the rates or the quality of service that would result from a better IXP infrastructure in the region. In Latin America there are no regional IXPs to add traffic between countries, as is the case in Europe, for example, where these interconnection points were installed in the cities of London and Amsterdam.

Among the main benefits of these IXP are the reduction in traffic, interconnection, and wide band costs, and the reduction of the lag time. This has been proven in countries where these infrastructures have been developed, as is the case of Argentina.

Agudelo points out that "Latin America pays close to USD 2 billion for international traffic costs, due to the absence of an IXP regional interconnection infrastructure, and this has an impact on the final rate paid by the user". He highlights that if an effective IXP offer is developed in the region, traffic costs could be reduced by 33 percent, and the savings would benefit the user. "There would also be a greater penetration of the service (it would increase by at least 5 percent, depending on the market structures of the countries) and would increase the connection speed".