Much like air travel, the internet has certain hubs that play important relay functions in the delivery of information. Just as Heathrow Airport serves as a hub for passengers traveling to or from Europe, AMS-IX (Amsterdam Internet Exchange) is a key hub for information getting in or out of Europe. Instead of airline companies gathering in one place to drop off or pick up passengers, it's internet service providers coming together to swap data – lots and lots of data.

Where the world's largest internet exchange points (IXPs) reside are mostly where you would expect to find them: advanced economies with sophisticated internet infrastructure. As internet access reached new populations around the world, however, growth in IXPs lagged and traffic tended to make some roundabout, and seemingly irrational, trips to the more established IXPs.

For example, users connected to a server just a few miles away may be surprised to discover that data will cross an entire ocean, turn 180 degrees, and cross that ocean again to arrive at its destination. This occurrence, known as the "boomeranging" or "hair-pinning” (or “trombone effect” due to the path's shape), is especially true for emerging markets, where local ISPs are less interconnected and hand off data to bigger carriers located in more established markets such as the United States or Europe, forcing all traffic to cover more ground and be billed transit rates.

To prevent this from occurring, and after realizing that building submarine cables wasn't enough, there was and continues to be a strong push to build out internet infrastructure by developing more IXPs with the idea that offering a place where local network operators can connect would reduce latencies (delays) and costs. International organizations like the Packet Clearing House set out to provide equipment, training, and operational support to governments and network providers to establish hundreds of IXPs around the world. The Internet Society offers an excellent policy brief describing how cost savings from IXPs can be upwards of 20 percent depending on what portion of a country's overall internet traffic is local.

The impact in some countries has been significant. In a 2012 study evaluating the impact of IXPs in sub-Sahara Africa, the introduction of the Internet Exchange Point of Nigeria (IXPN) allowed local operators to save over $1 million USD per year on international connectivity and encouraged Google to place a cache in Lagos (a service that significantly speeds up access to popular web content). The Kenya Internet Exchange Point (KIXP) allowed ISPs to save almost $1.5 million USD per year and increased mobile data revenues by an estimated $6 million USD. Both IXPs now act as regional hubs.

The call to expand IXP development grew louder as privacy concerns and the desire to keep data more sovereign increased, backed up by research from the Organization for Economic Cooperation and Development (OECD) asserting that countries with fewer IXPs typically experience more cross-border data flows. As a result, IXP growth accelerated even more, particularly in emerging economies. In 2011, OECD researchers counted 357 IXPs around the globe. By 2015, the number had grown to 452. Latin America went from 20 to 34 IXPs. In the past year alone, the percentage change in IXP growth for all regions was in the double digits.

Source: Packet Clearing House, Internet exchange point directory reports. Retrieved on 17 August 2018 from https://www.pch.net/ixp/summary_growth_by_region

Recent research, however, illustrates the challenges that hold IXPs back. In its 2012 review of Telecommunication Policy and Regulation in Mexico, the OECD noted that Mexico was the only member state that did not have an IXP and recommended they establish one for many of the reasons stated above: it improves efficiency, lowers cost, and keeps data local. They said it would also incentivize the creation of local content and data center infrastructure.

In 2017, the OECD followed up with another report, this time lamenting the fact that despite the establishment of an IXP in Mexico City, traffic exchange was low. They noted that the incumbent telecommunications operator in the country wasn't participating in the IXP, leading them to conclude that IXPs are inhibited in markets where a single player has an overwhelming share and does not participate in the exchange. Subsequent studies have concluded the same.

Our own data confirms these insights. A week’s worth of traceroutes showed numerous examples of packets originating in Guadalajara destined for Mexico City hair-pinning up to the United States. One example actually went to straight to Mexico City and still hair-pinned outside of the country’s borders before coming right back.

Even in Brazil, which implemented a unique government-commissioned, multi-stakeholder steering committee that created IXPs throughout the country, local traffic still sometimes hairpins to the US, Italy, or Spain. Again, research shows that the dynamic political economy of the telecommunications industry may be at play. However, instead of an absent incumbent operator, IXPs are sometimes bypassed due to distrust among the country's many operators who are concerned that interconnection would benefit competitors. Moreover, trans-regional routing remains very common. In at least one scenario, traffic going from Sao Paolo, Brazil to Uruguay (about 1,700 kilometers away from each other), will transit through two US cities, Spain, and Argentina before arriving in Montevideo. Using our own data, we were able to observe packets routing up to Miami on multiple traceroutes from Sao Paolo to Rio de Janeiro.

While IXPs have certainly helped several regions reduce the costs and latencies of internet traffic, they should not be thought of as a panacea to transnational routing. Their ability to do that can be inhibited by a host of other factors, which the Internet Society summarizes in four categories; a lack of trust between service providers, limited technical expertise, the cost of network infrastructure, and the cost of hosting an IXP in a neutral location.