The terms are ambiguous, but, in the context of this discussion could be defined as follows:

 

1. "Interconnection" refers to any relatively direct connection between two "networks" (which for purposes of this discussion we could consider to be ISPs, PTTs, GSM networks, etc.). Such a "direct connection" is typically paid for and operated by the two parties on each end of the connection, so that data flows cheaply and quickly between their two networks.

 

2. An IXP/PIX or "exchange" is both a physical networking location and a logical network concept which facilitates the construction of "interconnections". In terms of network topology an exchange could be viewed as the "center" or "hub" of a "star" network topology such that all traffic between any points on the network traverse through the "hub" and a single connection to the hub enables one-hop connectivity to any other point on the star.

 

An exchange is simply a practical response to an environment where multiple parties desire to establish multiple interconnection agreements (sometimes called peering). Also, there are cases where two parties might want to establish interconnection, but the cost of doing so might be too high to justify, even though both parties could benefit. In such cases an exchange may lower the cost to the point where an interconnection occurs when it might otherwise not be feasible.

 

At an exchange interconnections might be made by:

Often an "interconnection" can be accomplished within an exchange (at virtually no cost) by an engineer simply typing some commands into a piece of networking equipment; an interconnection without an exchange almost always requires the two parties to obtain a private circuit of some type from a PTT or perhaps to construct wireless equipment, build antenna towers, dig trenches for fiber, etc. Thus, an exchange can lower the cost of interconnection by factors of 1000 or more.

 

An exchange is also an economic entity which can be viewed to be a type of "market". Telecom companies typically prefer to have a "point of presence" at an exchange because it then becomes easier to sell services to the customers colocated at the exchange, since all parties are reachable via very low cost forms of interconnection. Exchanges "attract" telecom resources for sale (such as trans-oceanic fiber cables) because one connection at the exchange can generate many customers.

 

Finally, in most markets, the connections at an exchange are not regulated by any form of government. This may not be true in all African countries but the concept is fairly clear, especially in the United States. Under US laws telecom regulations are derived from the concept that a telecom company is using some type of public resource, and therefore should be taxed and regulated to account for that use. For example:

(Almost) all US regulations are derived from one of these points. At an exchange none of these points typically apply. An exchange is (usually) private property and interconnections established there use no radio frequencies or rights-of-way. Sometimes a carrier that has been granted monopoly status might locate at an exchange, and perhaps some interconnections with that carrier will be regulated even inside the exchange. Also, some regulated carriers might own and operate exchanges and in such cases activities inside those exchanges might be regulated. But, in the US, many exchanges are privately operated by companies which do nothing but build and operate exhanges, or they are operated by telecom companies that are not regulated, or are very lightly regulated. Thus, most activity within an exchange is considered entirely private between the parties, and it is free of government interferrence.

 

One of the problems with regulation in Africa is that the basis for the regulation does not always seem to have a sound theoretical underpining, such as the 1, 2, 3 cited above. Also, even when regulation is based on clear principles, and applied fairly to all players equally, it can still be bad public policy. Telecom regulation can be fairly and transparently applied; there can be a "level playing field" and, yet, the telecom markets may still fail to deliver services at an affordable price to customers. There is more to telecom regulation than having regulation be fair and transparent.

 

What goes on inside exchanges is a good indicator of what happens when there is NO regulation. WiFi (802.x) is another example of what happens when there is no regulation. I would submit that government policy should aspire to create telecom regulations that produce results that are at least as good as these examples, or, alternatively, eliminate regulation altogether.