Netflix Is First Customer Of New York Internet Exchange

The effort to migrate the Internet Exchange model to the U.S. got a huge shot in the arm recently when Netflix signed on to become the first customer of AMS-IX New York, Amsterdam Internet Exchange's first undertaking in the U.S.

AMS-IX has plans to open three Internet Exchanges -- in New York, Chicago and Silicon Valley -- by mid-2014, and is open to pursuing exchanges in other markets if demand warrants and data center operators are willing to partner with the company.

Netflix's decision to sign on with AMS-IX New York was not entirely unexpected, given the online entertainment provider signed on with AMS-IX in Amsterdam earlier this year and has been a key supporter of the Open-IX initiative that seeks to establish standards for developing the neutral Internet Exchange model in the U.S.

That model, which is prevalent in Europe, essentially provides a sort of open-source connection to overseas Internet access points, enabling companies to avoid paying exorbitant cross-connection fees to third parties like Equinix and Telx.

It's a model tailor-made for large Web-scale content owners like Netflix, Melanie Posey, VP of research at IDC, said via email. In bringing the Internet Exchange model to the US, AMX-IX is "specifically targeting companies like Netflix that have considerable customer bases in Europe," Posey said. "An interconnect at the AMS-IX exchange gets you to the rest of Europe more cheaply and with less hassle than Equinix."

AMS-IX's New York exchange really started taking shape in November when the company's U.S. subsidiary, AMS-IX USA, said it had reached agreement with data center operators Digital Realty, DuPont Fabros Technology, Sabey Data Centers and 325 Hudson to build and operate an Open-IX exchange in the New York area.

[Read about the progress made by a Facebook-led effort to develop an open, operating-system agnostic switch in "Open Compute Project Considers Switch Specs."]

Posey said the U.S. model for interconnections more closely resembled European Internet exchanges before the commercial Web emerged in the mid-1990s. Early Internet service providers did peering and interconnection on a bilateral basis until Equinix identified an opportunity to create centralized exchange points that charged a fixed price in exchange for less hassle, and which also allowed small ISPs that couldn't make other arrangements to offer interconnection services.

The subsequent rise of Equinix played a big role in preventing another cooperative model from resurfacing in the U.S. before now, Posey said.

Naturally, the appearance of Internet exchanges in the U.S. could eat into business for Equinix, Telx and others. But Posey said the competitive threat Internet exchanges pose depends on how many how many network operators and content players opt to ditch paid interconnections. She said Equinix can point to its global presence -- AMS-IX's U.S. exchanges will only link customers with Europe -- as well as the critical mass of network operators and cloud, mobile and app providers that already call its data centers home.

The potential rise of the Internet exchange model in the U.S. isn't likely to alter the way most companies do business online, but it certainly figures to shake up the model for delivering massive amounts of content to a global audience.

"This doesn't change much for the average IT user," Posey said. "But for large Web-scale content providers like Netflix, this is a big deal."

Editor's Note: An AMS-IX spokesperson said AMX-IX open to adding other points of presence -- not exchanges -- in other markets.