MAE Bottleneck Cure

Equinix Plans Neutral Internet Exchange Point

Now a new company, Equinix Inc., Redwood City, Calif., has entered the IX space with a plan to open as many as 35 centers worldwide. It started with one in Ashburn, Loudon Co., Va., last month. It will offer state-of-the-art security, connectivity and support services, and a promise not to compete with the companies that will use its facilities.

IXs are a vital link in the Internet. If an America Online Inc. (AOL), Dulles, Va., user needs to send e-mail to a subscriber of Earthlink Network Inc., Pasadena, Calif., or a cable operator has to link its cable modem customers to Internet services, there has to be a place to connect. That has been the function of the IXs.

Most of the existing IXs are operated by large carriers, such as MCI WorldCom Inc.; Sprint Corp.; Ameritech Corp., Hoffman Estates, Ill.; and Pacific Bell (now part of SBC Communications Inc.), San Francisco. That, say ISPs and competitive carriers, is the problem. The business practices of the operators of those IXs are most favorable to their owners. ISPs are required to buy lines only from that operator, and direct connections between ISPs in the facility are discouraged.

"The driving force behind this is that many ISPs are questioning the neutrality of the carriers who own and operate the MAEs, and WorldCom is a prime example," says Joanna Makris, analyst of the datacom group at The Yankee Group, Boston. "They have been cited quite frequently for poor performance at the MAEs East and West that they operate."

The only facility not owned by a carrier has been the Palo Alto Internet Exchange (PAIX), owned by Compaq Computer Corp., Houston, and recently purchased by AboveNet Communications Inc., San Jose, Calif., for $75 million. Opened in 1997, the facility had the security, peering and power capabilities that ISPs were looking for and quickly filled up, serving 60 ISPs within a year.

Equinix was founded in 1998 by a group headed by CEO Al Avery, who was manager of PAIX. The company plans to offer a carrier- and ISP-independent facility that will not offer web hosting or any other service that might be in competition with its customers. It received "significant" funding from Cisco Systems Inc., San Jose, Calif.; Microsoft Corp.; Redmond, Wash.; and Benchmark Capital, Menlo Park, Calif., in late May.

"What was needed was to have multiple carriers and multiple ISPs going into an exchange point," says Jay Adelson, chief technology operator, Equinix. "The operators of the exchange point had to be neither carrier nor ISP, like the Switzerland of the Internet."

Any two customers can connect inside the facilities using their own lines, and are charged only a monthly fee for maintaining a wire, which can be any medium or protocol the customers choose. The facilities will have what Equinix calls "James Bond" security, and also will conduct research and development (R&D) activities.

Jonathan B. Haller, director, network and Internet services, Current Analysis Inc., Sterling, Va., says the chief appeal of Equinix will be its impartiality. Also, the company offers more than commodity connectivity. "Their value proposition is that they are a top-of-the-line, high-security data center, and there is a market for that," Haller says.

Long term, however, Equinix may face competition because "regardless of their experience and plans, it's not impossible for a competitor or somebody with similar levels of experience and venture-capital funding to do the same thing."

Already, Equinix is not alone in this market. When AboveNet Communications acquired PAIX, it pledged to operate neutrally as a separate corporation. "The one thing that could be troublesome is that they are going to offer value-added services, such as managed applications, down the line," Makris says , "and then will compete with other companies that exchange traffic there."

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