XchangePoint, Europe's first commercial Internet peering provider, opened Tuesday on the promise of providing better service than Europe's community of not-for-profit peering clubs, whose approach is looking increasingly limited, it says.

The London-based company is offering ISPs access to its peering point located in colocation facilities in the city's Docklands area, and will charge for the capacity they use to link to other ISPs, although as a neutral, it will leave customers to negotiate their own peering agreements.

Up until now, peering between ISPs has involved joining one of Europe's peering exchanges, such as the London Internet eXchange (LINX) for example, but with Internet traffic increasing, exchanges such as LINX may struggle to cope.

"The market has historically been served by clubs that have rules which might exclude some of the players," said XchangePoint's sales director Jeff Meulman, "and their ability to upgrade their network is dependent on membership fees."

XchangePoint said ISPs have often been forced into costly private peering agreements because none of the existing clubs offers a formal SLA.

"Our SLA provides minimum guarantees on network availability, packet loss, delivery time and time to response to inquiries," chief technical officer Keith Mitchell told Total Telecom. "But it's very important that we remain neutral, so peering performance SLAs are between customers."

XchangePoint promises a 10-day lead time on connection to its peering point which uses a dark fiber loop from Level 3, routers from Extreme Networks and optical multiplexing equipment from Munich-based ADVA Optical Networking.

Services include interconnect scaleable to 10 gigabits per second for multimode IP traffic from mobile, video and VoIP applications. Offerings include public and private interconnect, IPv6 and multicast capabilities.

"The real economic advantage is that the more traffic [ISPs] can move from IP transit to peering, the more cost they can save," said Mitchell.

XchangePoint's business model is based on selling capacity, not on receiving revenue from peering agreements or on customer numbers, an arrangement Mitchell thinks means it will not really be affected by the general drop in European bandwidth prices.

"Our model is based on Internet traffic growth, and we're selling a premium product which actually takes a significant amount of technical skill [to implement and maintain]," said Mitchell. "And we're not just selling capacity [alone] but the ability to use it in conjunction with other ISPs."

Although XchangePoint does charge a quarterly rental fee, it isn't reliant on it, as peering clubs are on their membership fees, to keep their networks ahead of the technology curve, especially investment in WDM optical multiplexing equipment.

"Although LINX [for example] has been successful at raising its rates above inflation to perform network upgrades, it won't do DWDM, and every [peering company] in Europe has backed away from doing that one as a result of inability to raise capital. [Yet] the best way to address the increase in traffic is through DWDM equipment," said Mitchell.

XchangePoint has 4 customers in beta trial and plans to roll out points in five other European countries in the next 12 months. It plans to "work closely with one or two" customers from the broadcast world.

Locations in Paris, France and Frankfurt, Germany are priorities and should be completed during Q3 or Q4 this year. XchangePoint is currently housed at London Telehouse, Redbus Interhouse and Global Switch, and is currently looking for one more colocation partner.

XchangePoint has received venture capital funding of £5.6 million from Nexus Investments, GMT, Clairsholme Investment, MIGHT and Monument Trust, but more is planned.

"This gives us a fully funded model for the U.K. and the early parts of the continental Europe build out," chief executive Annette Nabavi told Total Telecom. "We will go back to the market when it feels right, which I think will be early next year."