How the Internet economy works: Guns, butter and bandwidth

Most people know certain things about the Internet. They know that cables run under the sea, that wires come into your homes, and that modems carry the digital signals to your devices. But they’ve probably never heard of Internet Exchange Points, and that’s where the magic of the Internet really happens.

Internet Exchange Points (aka IXPs) are the manufacturing floor of the Internet — that is where bandwidth is created and deployed. And bandwidth is just like water and oil and other economic goods: If your country has a lot of it, prices fall; if it doesn’t have a surplus, prices go up. And that has a big impact on the web companies that buy bandwidth. Though Internet Exchange Points are a key building block of the Internet economy, you’d never guess it from where they’re located. They don’t remotely resemble other temples of commerce. You don’t see people standing in them yelling at each other, like you would at a stock exchange. Instead, they can be located inside a beat-up building near a railroad track. Sometimes there’s not a single human being in the vicinity.