The Internet was built over the years by “assembling” networks run by various operators. Interconnection nodes, also called GIX (Global Internet eXchanges), perform traffic exchanges between these various networks. These exchanges are most often done through peering agreements, which are symmetrical and free.
Usage has changed greatly and, just like other communication technologies, no one ever imagined the Internet’s success, with P2P exchanges, blogs, video content sites like YouTube, etc.
The emergence of new uses, the increase in content, the success of some applications progressively puts into question the role played by a handful of players and agreements governing traffic exchanges, which have become asymmetrical. In particular, operators feel that other types of players are now taking advantage of a network in which they never invested. In addition, the changes required to provide increasingly better performance are costly, and the potential for changes in usage portend even greater investment in infrastructure. In the eyes of operators, the question of sharing the costs has become essential.
The objective of this study is to identify the actual risk of Internet network saturation. What is the outlook for Internet traffic changes and what are the consequences on infrastructure? What players will be the most involved? This report presents the strategic options that could be implemented by operators.

Key Questions

What bandwidth for what types of consumer applications?

Who will benefit from Internet traffic changes in the data transmission market?

Is CDN the best solution for increasing video flow?

How can congestion risk be avoided at the interconnection nodes?

Are new negotiations on peering agreements inevitable?

Will technical changes compensate for network saturation risks?

Who should pay for the cost of additional Internet traffic?

Will network infrastructure investment allow for monetizing content?
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1. Introduction
2. Players involved
2.1. Value chain 9
2.2. Categories of players and market trends 9
2.2.1. Data transport players 9
Access 9
Metropolitan Area Networks (MAN) 10
National/regional transport 12
International transport 13
Submarine cable operators 14
2.2.2. Interconnection players 15
Collocation providers 15
Global Internet eXchanges (GIX) 16
Service platform hosts 19
2.2.3. Content broadcasting optimisation 20
2.2.4. Primary players by service category 23
3. Headed for network saturation?
3.1. Change in usage 24
3.1.1. P2P (Peer-to-Peer) 25
3.1.2. On-line gaming 27
3.1.3. On-line video 27
3.1.4. Other applications 30
3.2. Effect on networks? 31
3.2.1. Impact of usages on Internet traffic 31
3.2.2. Physical saturation more likely at the network nodes 31
3.2.3. Technical progress to compensate for saturation risks 34
3.2.4. Impact on players in the value chain 34
4. Impact on current models
4.1. Migration of transport network value and broadcasting to distributed content 36
4.2. Telecom operators positioning options 37
4.2.1. Refocus on being an 38
4.2.2. Vertical integration targeting publishing content and services 38
4.2.3. Diversification and expansion into the CDN business 39
4.2.4. and capturing control of distribution and revenue sharing 39
4.3. Conclusion 40
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Table 1: Metropolitan Area Network Integration 11
Table 2: Change in Completel’s indicators 12
Table 3: Change in AMS-IX indicators 18
Table 4: AMS-IX top 10 by aggregated port speed 18
Table 5: Change in Akamai’s indicators 22
Table 6: Examples of service providers by service category 23
Table 7: Examples of interconnection 23
Table 8: Market for massively multiplayer video games (millions USD) 27
Table 9: Impact of the growth in Internet traffic by category of player 35
Figure 1: Internet data transport value chain 9
Figure 2: Interoute’s pan-European network 13
Figure 3: FLAG Telecom’s worldwide network 15
Figure 4: Exchange at level 2 16
Figure 5: Exchange at layer 3 16
Figure 6: Status of OVH’s Paris network – 9/10/07/4:00 pm 20
Figure 7: Estimate of the need for speed for consumer applications 24
Figure 8: Comparison of the type of content downloaded during one quarter in France, the United Kingdom and the United States 25
Figure 9: Internet traffic by type of protocol, 1993 – 2004 (in %) 25
Figure 10: Distribution of Internet traffic by type of protocol at the end of 2006 26
Figure 11: Expansion in the number of IPTV subscribers to telecom operators by region (mid-2005 to mid-2007) 28
Figure 12: Change in bandwidth needs per household for video 28
Figure 13: Change in the number of unique video viewers on YouTube 30
Figure 14: Growth and outlook for changes in Internet traffic 31
Figure 15: Change in backbone capacity 32
Figure 16: Change in cumulative traffic in the primary European GIX (in Gbps) 33
Figure 17: Change in the number of neutral and commercial GIX in Europe 33
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