The local exchange of Internet content in Kenya and Nigeria has allowed ISPs to save US$2.5 million, as the countries realize the benefits of a liberalized telecom environment, respected regulators, increased Internet usage and a competitive mobile sector.

A study commissioned by ISOC, one of the biggest supporters of Internet training and infrastructure development in the region, shows that ISPs and content providers have been able to reduce connectivity costs largely because of Internet peering. The research was conducted by Analysys Mason.

"An IXP helps to deliver the benefits of liberalization -- lower prices and greater usage -- which in turn can provide support and credibility for further efforts to liberalize and develop the sector; IXPs can also help to improve connectivity between neighboring countries, further increasing Internet usage and benefits," said the report, which was released on Tuesday.

The Kenya Internet Exchange Point (KIXP) currently exchanges 1G bps during peak time traffic, reducing latencies from 200-600ms on average to 2-10ms, allowing ISPs to save $1.5 million. If this capacity was carried by an international transit carrier, the cost is $300 per MB. KIXP has helped increase mobile data revenues by an estimated $6 million for operators having generated additional traffic of at least 100M bps per year, according to the report.

The Internet Exchange Point of Nigeria (IXPN) currently localizes 300M bps of peak traffic and allows national operators to save over $1 million per year on international connectivity. The report detailed how the presence of the IXP induced Google to place a cache in Nigeria as the first step in plans to build out Google infrastructure to Lagos, and is at the center of a partnership to improve communications between universities.

With a population of 150 million and 150,000 fixed and mobile broadband subscribers, Nigeria is hampered by the collapse of NITEL, the incumbent fixed network provider, higher cost of connectivity within the country, government tax requirement for all companies laying fiber, and

vandalism of installations, especially in poor neighborhoods.

Just like KIXP, IXPN growth has been propelled by Google through its global cache and the university interconnection project that the search giant supports in several African countries.

Online government services have been cited as major drivers for local content because they can peer directly. The Kenya Revenue Authority peers directly at KIXP, allowing faster connection for tax returns and clearing customs for importers. Indeed, KRA reported 160,524 online tax returns in the first half of 2011 and 5,000 users were registered for the customs system, representing 95 percent of the industry. The World Bank estimates that the KRA online system saves the private sector $ 4.5 million and lowers corruption rates.

"The benefits realized by KRA demonstrate the potential value e-government services can derive and not just from revenue generation but in increasing the value of the Internet as service delivery tool, " said Michuki Mwangi, KIXP CTO.

Globally, the establishment of an IXP in the country enables local ISPs to connect directly together and exchange domestic traffic "peering" free but in Africa, ISPs still exchange traffic through the US and Europe, even though the content being accessed is hosted locally.

Safaricom, the largest mobile service provider in the East Africa region, does not see much value in exchanging content locally, insisting that out of its 3Gbps, only 10 percent is local content.

"The bulk of the cost of a data network infrastructure arises from building and maintaining a 3G network infrastructure as opposed to costs of transit to the Internet; therefore, with this background in mind, the ... model is at present not seen as a feasible option," said Nzioka Waita, Safaricom corporate communications director.

Apart from its 3G infrastructure, Safaricom invested $2 million in cloud services and one of the selling points was that with local content, there will be minimal latencies and local exchange of content will lead to faster services.

At the Africa Peering and Interconnection Forum held in Ghana last year, ISPs argued that IXPs in Africa needed to show the economic benefits of peering in order to attract ISPs and content providers that felt that international transit was economically viable, because they can buy in bulk.

One of the major issues discussed in the report is the ability of Kenya and Nigeria to attract regional content in the same way as South Africa has, which has IXPs in Johannesburg with peak traffic of 3G bps and Cape Town with peak traffic of 2G bps. Most of the traffic is from Botswana, Zimbabwe, Mozambique and Namibia. Kenya has the ability to attract content from Uganda, Rwanda, Burundi and Southern Sudan, while Nigeria can take advantage of poor IXP infrastructure in West Africa and attract ISPs and content providers in Ghana, Senegal, Ivory Coast and Togo.

For international content providers like Akamai to peer at the IXPs, the report noted there was need in increase the numbers, from the current 25 at the KIXP and 30 at IXPN. With the increased connectivity and rising number of internet users, Mwangi is confident that KIXP will attract one of the biggest content carriers.

"With over 107 networks from Kenya and across the region reachable via the KIXP, we are in a position to leverage Kenya as the preferred access point for Sub-Sahara Africa for International content providers entering the region," added Mwangi.

One of the main advantages of local peering is the ability to continue offering services in the event of fiber optic or satellite service outages. The IXPs also have copies of root servers, that allow continued operation in case of a DDoS (distributed denial of service attack).