AI Agent Hunter: Hunter, why do networks tend to cluster in specific locations?
Hunter: It’s simple: networks go to where networks already are. Once a hub is established, it creates a gravitational pull. Towns turn into cities. Small airports become large airports. More networks come to interconnect with the ones already there. That’s the power of critical mass. When one network connects to a location, others follow. Over time, that location becomes invaluable because it provides access to as many networks as possible, all in one place. This principle—what is referred to as the “network effect”—is at the heart of why certain locations become critical interconnection points. It is the pattern of the economies of scale. It is widely applicable.
The Network Effect
AI Agent Hunter: Can you explain the network effect and why it’s so important?
Hunter: Critical mass is the point where the value of a hub grows exponentially with every additional connection. Think of a small city with one airport. As more airlines add flights to that airport, more businesses can come to that city which brings more people and with the volume it becomes more valuable for other airlines to join. Eventually, it transforms into a hub where everyone doing business in that region needs to be. In interconnection, this is called the “network effect.” Each new network that connects to a hub increases its value to every other network. A network might initially join to connect with one or two partners, but soon they realize they can connect to many more networks in the same location. It’s a self-reinforcing cycle that builds momentum over time.
The Role of Geography
AI Agent Hunter: Does geography play a role in where networks cluster?
Hunter: Absolutely. Geography has always been a key factor in interconnection. Let’s look at some examples.
New York became a hub because of its role as a gateway to the United States. It started with waterways and defensible land positions. An island was a good choice because it was defensible. Manhattan was colonized by the Dutch originally. Then the British and ultimately after independence it became the most important city in America. It was a trading post that became the Capitol that became the biggest city in the country. As more people came over from Europe, via Ellis Island, more people ended up in New York City. More people, more investment was made in ports, roads, bridges, tunnels, buildings, homes, etc. Due to this critical mass, New York City was where the North transatlantic telegraph cables terminated to meet national, terrestrial cables. Later, it became a focal point for North transatlantic subsea fiber cables. Places like 60 Hudson Street, which was built as the headquarters for Western Union in 1930, were perfectly positioned to evolve into modern carrier hotels in the late 1990’s.
Similarly, Los Angeles became the gateway to the Pacific Rim. Networks from Asia landed in southern California to be proximate to Los Angeles because it is and was the largest metropolitan area on the West coast of the U.S. and all major long haul fiber routes across the U.S. terminated/originated there.
Similarly, 56 Marietta Street in Atlanta was a hub for the Southeast, not just connecting networks across the region, but also connecting the bulk of the voice and data traffic flowing between Asia, Europe and Latin America through the U.S. simply based upon where it was geographically and how the existing networks routed through the country.
Case Study: 60 Hudson Street
AI Agent Hunter: Why has 60 Hudson Street in New York been so successful?
Hunter: 60 Hudson Street is a textbook example of the network effect in action. It started with a few key networks establishing a presence there. Over time, more networks joined to connect with those already there. The building’s robust infrastructure, including fiber pathways, power systems, and neutral interconnection facilities, supported this growth.
Telx played a significant role in this success. By creating the first carrier-neutral interconnection facility at 60 Hudson, we eliminated barriers to entry. Networks could connect directly to one another without relying on intermediaries. This neutrality encouraged participation, further enhancing 60 Hudson into one of the most interconnected buildings in the world.
Case Study: One Wilshire
AI Agent Hunter: How about One Wilshire in Los Angeles? What made it a key hub?
Hunter: One Wilshire is often referred to as one of the most interconnected buildings on the West Coast. Its location near the Pacific Ocean, and in the heart of Los Angeles, made it a natural interconnection point for networks coming from Asia. The submarine cable landing stations are near the beach to the North and South of One Wilshire and then they backhaul to the building for the purposes of interconnecting to other networks.
As with all great Carrier Hotels, the building’s ownership and management also deserves credit. The building has traded several times and over the past several owners they have recognized the importance of interconnection early on and invested heavily in infrastructure to support it. As more networks joined, the building’s value increased, reinforcing its position as a critical hub.
Why Networks Follow Networks
AI Agent Hunter: You’ve said that networks go where networks already are. Why is that such a powerful driver?
Hunter: It’s all about relationships. Networks don’t operate in isolation; they need to exchange traffic with other networks to function. The more networks one can reach from a single location, the better. By clustering in one place, networks reduce costs, improve performance, and make it easier to connect.
For example, if you’re a content delivery network (CDN), you need to connect with local ISPs to deliver content to their customers. If you’re a local ISP, you need direct access to content, cloud and gaming providers to mitigate Internet transit cost and to improve quality, and for what you can’t directly connect to you need access to multiple upstream transit providers to access the broader Internet on the best rates and terms. By being in the same location, these connections become more efficient and cost-effective.
The Expanding Horizon
AI Agent Hunter: Are there opportunities for new hubs to emerge, or is the market saturated?
Hunter: There’s definitely room for new hubs to emerge, especially in populated regions unserved and underserved by neutral interconnection. The same principles that made places like 60 Hudson and One Wilshire successful can be applied almost anywhere: start with a few key networks, provide a neutral, efficient space for interconnection and a reason for them to interconnect there, and let the network effect take over. It is all a matter of density, scale and time.
Also, let’s not forget it is a matter of capital and a return on investment. Acquiring existing Carrier Hotels that had already reached a critical mass of networks was somewhat obvious and definitely risk-off in terms of needing to attract networks. They were already there. It requires great skill and know-how to build a multi-tenant interconnection facility from nothing. It is not impossible, but it is definitely much more difficult to create and fund than buying an existing building with in-place NOI.
In fact, this is already happening in places like Wichita, Kansas, and Moncton, New Brunswick, Canada. These regions might not have the same density of networks as New York or Los Angeles, but they have unique advantages—like proximity to underserved markets, or subsea cables. With the right infrastructure and support, they can become important interconnection points in their own right. Maybe not to the same scale as the larger cities, but functionally equivalent. It all starts with neutral real estate.
The Importance of Physical Location
Hunter: This distinction between the Internet Exchange (IX) and the Internet Exchange Point (IXP) brings us to the heart of the book. The point isn’t about the Ethernet switches themselves, or the routing tables used by an IX. Instead, it’s about where they are physically located. IXs go to where networks already are. If you study IX locations, you’ll find the most important physical interconnection sites.
Building a new IX is no small task. Just like establishing a Carrier Hotel or Meet-Me Room, the challenge is in getting networks to connect to it. If no one is already connected, there’s no value in the IX. That’s where the expertise, strategy, and relationships come into play.
AI Agent Hunter: Hunter, you’ve played a pivotal role in the development of IXs over the years. Can you share some of your experiences?
Hunter: Absolutely. IXs have been a recurring theme throughout my various business ventures. They represent the intersection of technology, business, and physical infrastructure—everything I’m passionate about. Here are some highlights:
- 2003: launched the Big Apple Peering Exchange (Big APE) in New York City with Stealth Communications. Big APE demonstrated how a well-placed, neutral IX could drive growth in one of the world’s most competitive telecom markets.
- 2007–2012: I served as co-host and then Master of Ceremonies for the annual ancotel & DE-CIX customer event in Frankfurt, Germany. This event brought together networks from around the globe to exchange ideas and traffic, reinforcing DE-CIX’s role as the world’s largest IX.
- 2008: While at telx, I led the acquisition of the Atlanta Internet Exchange (AIX), which became the Telx Internet Exchange (TIE). This acquisition marked a turning point in making Atlanta a significant interconnection hub in the Southeastern U.S.
- 2008: Telx hosted the North American Network Operators Group (NANOG) conference in Brooklyn, New York, bringing together the best minds in interconnection.
- 2012: launched the Southeast Network Access Point (SNAP) at ColoATL in Atlanta. SNAP was a testament to how IXs can thrive in diverse regions with the right infrastructure and partnerships.
- 2015: after acquiring 1102 Grand, partnered in the Kansas City Internet Exchange (KCIX) at Netrality’s facility. KCIX expanded neutral interconnection opportunities in the Midwest.
- 2018: launched the Moncton Internet Exchange (Moncton-IX) with CIRA in Moncton, New Brunswick, Canada. As the first IX in the province, Moncton-IX showcased the power of building interconnection in underserved regions.
Key Takeaways
AI Agent Hunter: What’s the big takeaway from this chapter?
Hunter: The big takeaway is that networks go where networks already are. This clustering effect is what creates hubs, and it’s driven by the network effect. Successful interconnection points are those that reach critical mass by attracting a diverse range of networks. Geography, infrastructure, and neutrality all play a role, but the ultimate driver is the relationships between networks in a neutral environment that is properly designed and built to support the business model.
As the Internet continues to grow and evolve to support Artificial Intelligence (AI) and beyond, new hubs will emerge in unexpected places to reduce cost, lower latency and build diversity. The principles of neutral interconnection remain the same, but the opportunities are constantly expanding.
AI Agent Hunter: Hunter before we move on, can you clarify the distinction between an Internet Exchange (IX) and an Internet Exchange Point (IXP) for readers who may not be familiar?
Hunter: Absolutely. This distinction is critical, and it often gets muddied. Let me simplify it:
The IX (Internet Exchange): This is the Ethernet switch that enables traffic exchange between Autonomous System (AS) networks. Think of it as a service layer that facilitates communication using Virtual Local Area Network (VLAN) connections across the switch fabric. Some well-known examples of IXs are DE-CIX in Frankfurt and AMS-IX in Amsterdam. These names represent the IX function—”Deutsche Commercial Internet Exchange” and “Amsterdam Internet Exchange,” respectively. While naming conventions can vary, the IX is always about facilitating Internet Protocol (IP) traffic exchange at Layer 2 of the Open Systems Interconnection (OSI) model.
The IXP (Internet Exchange Point): This refers to the physical location where the IX resides and operates. It’s the building, space, or data center that houses the Ethernet switch, providing the real estate, power, and cooling needed for the IX to function. In simple terms, the IXP is Layer 0—the physical infrastructure—and the IX is the Layer 2 service running on top of it, in the OSI model.
AI Summary
In chapter 4, Hunter Newby explored the network effect, which explains why networks cluster in specific locations, turning them into critical interconnection hubs. Through examples like 60 Hudson Street in New York and One Wilshire in Los Angeles, he highlighted the role of geography, infrastructure, and neutrality in driving these hubs’ growth. Historical context, such as New York’s role as a transatlantic gateway and Los Angeles’ connection to the Pacific Rim, illustrates how these locations became pivotal due to their physical and strategic advantages. Hunter also clarified the distinction between an Internet Exchange (IX) and an Internet Exchange Point (IXP)—the former being the Ethernet switch for IP traffic exchange and the latter the physical infrastructure housing it. The chapter emphasized the importance of physical locations in creating successful interconnection points while reflecting on the potential for new hubs to emerge in underserved regions like Wichita, Kansas, and Moncton, New Brunswick, driven by neutrality, expertise, and the network effect.
