Why are NSPs Paying All This?

Actually, Egyptian NSPs, like any other non-Tier-1 carriers, have no choice but to pay the full amount of the transmission as well as of the peering or precisely the transit. This is because they cannot fulfill any of the Tier-1 carriers' polices for settlement-free interconnection. Such policies are by all means impossible for any of the NSPs to achieve.

As an example of such Tier-1 policies, MCI requires any operator seeking settlement-free interconnection with its network to have coverage in at least fifty percent of the geographical region in which MCI has facilities. The policy also asserts that the ratio of traffic exchange shall not exceed 1.8:1. It further entails certain requirements in the backbone network of the requester such as full redundancy, minimum capacities of 2.4 Gbps for interconnection with MCI-US, 622 Mbps with MCI-Europe and 155 Mbps with MCI-Asia Pacific.¹⁶ Therefore, it comes at no surprise that with the current norms of the Tier-1 carriers, Egyptian NSPs will always be deemed as customers to such carriers and hence bear the whole cost for both the bandwidth as well as the peering.

There are a number of arguments that have been raised over the past few years describing the IIC issue from a business perspective, and putting forward solutions that may help operators from developing countries overcome this problem and in some cases be in a stronger position while negotiating with Tier-1 carriers.

A well-known debate is the lack of national peering in most of the developing nations' networks. The argument here is if operators in such countries manage to build national exchange points and aggregate local traffic, they can save in their international capacities because local traffic will stay local rather than traveling oversees, thus the overall amount paid in international bandwidth will be less. The same argument is used on a regional level, that if a number of countries in a certain region were connected via some regional exchange point, again this will keep regional traffic regional and may as well attract other exchange points of Tier-1's to peer with.

More importantly, building local and regional Internet Exchange Points (IXPs) shall help operators of the developing world to attract content from developed countries to be mirrored and hosted in such IXPs, thus lessen the asymmetry in the traffic exchanged between developed and developing nations. However, building IXPs in itself does not change a fundamental aspect in the current model of IIC, which is the fact that operators from developing countries will keep paying the full amount no matter how much this amount is.

As per the Class A and B licenses in Egypt, local peering is mandatory for all NSPs. However, not all NSPs are connected to the exchange point and even those who are connected do not see much of a benefit. Establishing a peering point in Egypt has never been technically challenging for the NSPs. The challenge comes primarily from the competition between NSPs, agreement on a certain peering criteria as well as the inability to recognize a mutual benefit obtained from such a local connectivity. Nevertheless, it is expected that with the continuous development and increase in local content, NSPs will be more eager to effectively interconnect and hopefully save some of their international bandwidth costs.

On the other hand, regional peering between Egyptian NSPs and other operators from Africa and the Arab World has even been more challenging. There have been some negotiations between more than one NSP and other counterparts from the Arab region, yet nothing has been materialized. According to NSPs, Egypt has a lot more Arabic content than any other neighbor country does, and that's why operators from such countries have expressed interest in peering with them. But those operators want to equally share the peering cost with the NSPs, which does not convince the latter because they have larger customer base as well as more content. So, as with local peering, the problem is not technical, it is rather the lack of a business model that looks appealing and satisfactory for both sides.

Another possible scenario that may help Egyptian NSPs mitigate the burden of their international costs involves having more international cable providers in Egypt, either with their own landing points installed or at least with permission to use TE's landing points. As indicated earlier in this chapter, there are currently FLAG as well as the SEA-ME-WE 3 & 4 international cable systems that pass through Egypt serving most of its current as well as its prospect international telecommunication services. However, the SEA-ME-WE system has so far not been able to compete with FLAG as far as Egypt's Internet international business in concerned. Therefore, the question is what if a new cable system is laid down across the Mediterranean linking Egypt with Europe? Would this create more competition and help the NSPs get better offerings for international bandwidth? Although prices have been falling rapidly following the FLAG agreement with TE to provide NSPs with IRU-based bandwidth, some NSPs do envisage that having an alternative to FLAG would allow them to get more competitive offerings.

The last model is the one led by Australian and Asian operators who have invested in their infrastructures and built PoPs around the world in order to co-locate with Teir-1 carriers, hence be able to negotiate better deals with them. It is not deemed impossible that an Egyptian operator could take the same approach, despite the fact that the size of any of the existing NSPs is yet too small compared with any giant telecom carrier. Also, the number of Internet subscribers in Egypt, five million, is much less than that in many developed countries on the Asian-Pacific side, which consequently reflects on much less traffic volumes as well.