Focal points for connectivity, innovation and growth

Networks need aggregation points - places where local networks meet the backbone connections to the Internet and the rest of the world. A Digital Exchange is a new aggregation point that can support both the development of new networks and the digital economic activity that will use them. For networks it provides:

A connection point with the rest of the world for new local access networks, helping to strengthen the business case of those networks by lowering the cost of backhaul connectivity.
An agreed place where carriers can bring backbone connections and install server and switching equipment, confident that there will be customer networks and users they can serve.
A good location for servers, with excellent connectivity upstream to the Internet and wider world and downstream to the local access networks.

The value of a Digital Exchange to a neighbourhood is multiplied however by providing space for businesses to locate - especially small digital, creative, IT and start-up businesses. The right accommodation made available at the right price and on the right terms can attract businesses that want to take advantage of the connectivity (upstream or downstream) and hosting facilities. For this reason Digital Exchanges support both the creation of new infrastructure, and the creation of new business that will use and benefit from it.

Digital Exchanges offer a way to overcome a path dependency affecting investment in network infrastructure: the business case for new investment is often stronger where some network already exists. The cost of backhaul can be shared by access networks connected to the same aggregation point. The business case for a new backbone link is strengthened if it can serve multiple access networks or servers. For this reason Digital Exchanges need to be open, shared by different networks and carriers.

Existing hubs and aggregation points such as data centres can sometimes fulfil the same function as Digital Exchanges. Often however they are in the wrong place - too far from the places where new access networks would be viable. Telephone exchanges are generally too restricted - they offer very limited access and are expensive for locating new network equipment.

An ideal Digital Exchange will be in a place where it can serve local access networks - focused on business or domestic users or both, urban or rural. It will have adequate power and security to offer co-location hosting - perhaps only small-scale but with power backup and cooling. It will be somewhere that can attract new businesses that want to benefit from the connectivity and hosting. It will be set up to serve its business users and respond to their needs, a shared asset offering easy terms, fully open and ‘carrier neutral’.

Local authorities and partnerships can use the Digital Exchange concept as a focus for intervention and investment. The creation of a Digital Exchange can attract private investment and leverage any public commitment. Capital investment can be used to develop property and associated passive infrastructure rather than for contentious network build. Investment can directly serve economic development objectives because it is focused on developing the digital economy rather than increasing broadband speeds.