Peering versus Transit

Mon Sep 30 09:14:22 UTC 1996

| Where a phone company exchanges traffic with another phone compnay
| and there is some form of settlement involved, this cannot apply
| to the IXs until some serious technology breakthroughs happen in
| terms of measurement of IP.

I am the last person to argue for fine-grained measurement
of traffic.  However, the practice of adjusting prices by 
a gross estimate of how much traffic is moved is venerable
in the commercial Internet (it goes back to at least
Alternet's T1-LV service, which I remember being
introduced when I was at UUNET Canada a few years ago).

I see no flaws in a seller saying, "hey, here's a
threshold that you can't go beyond without paying more
$$".  Whether this is implemented by looking at link
statistics over time and giving some warning that
thresholds have been crossed, and that if they keep being
crossed, the bill will become more expensive, or this is
implemented by a router noticing that a threshold is being
crossed and it dropping traffic (using, perhaps, a
progressively aggressive RED, or tail drop, or dropping
out of the biggest or newest flows, or whatever)
automatically seems to be a detail to me.

People into traffic-planning probably would tend to prefer
the second implementation type over the first.  Wide-scale
deployment of things like RED gateways might change some
of that, however.

Moreover remember that most big-provider (telco) traffic
is moving away from EPs these days, and that the fact that
I was dealing with EPs was not an accident nor ignoring
that particular sea change.  

Therefore, as I noted, the idea of pricing comes from
whose customers scream.  If your customers won't scream at
all if you don't talk to X, but their customers will
scream and look for a different provider, then you can
charge X a great deal of money for each bit of bandwidth X
requires to make X's customers happy.

If the reverse is true, X can charge you lots of money for
each bit of bandwidth.  (Notice that the same is true wrt reachability).

If, OTOH, both customer bases scream, it becomes somewhere
between a game of chicken and a rational business
agreement between competitors in agreeing upon who charges
what price.

You will note that among the very large providers, if any
of them stop talking with any other, there will be
screaming on both sides, and so far there has been both
reactions (chicken and agreeing on pricing or bearing the
burden of costs).

Marketing and sales people do track how one is doing wrt
increased or decreased sales, and ops folk do track how
one is doing wrt scream about angry customers.   A
well-organized company will connect ops/marketing+sales
with bean counters and engineers and come up with a
consensus that should be good for the company.
This is what's needed much more than fine-grained counting
of traffic, in determining price points for "settlements".

| Just to add to the confusion...

Not really.  Nobody in their right minds (hi Dr Cerf!)
would ever seriously propose a bell-like settlement model
that required answering any of the questions you posed.

	Sean.