peering charges?

Dirk Harms-Merbitz dirk at
Mon Jan 27 18:23:12 UTC 1997

On Mon, 27 Jan 1997, Vadim Antonov wrote:

> Ok. How do you translate the number of packets into figure in $s?

Lower limit would be total cost of me running my network divided by the
number of packets transitting it plus my desired return on investment.
Note how my lower limit changes with the usage of my network! Upper limit
would be how much my competitor is charging for the same thing since
meaningfull differentiation of IP transport is hard if not impossible.

> What is the value of a packet?  It is not even clear if packet crossing
> from your network to my network gives _me_ any value.  It can as well
> be for _your_ benefit.

Nah, you originated the packet for reasons unknown to me. It transits my
network which is what I charge for. There is no need to determine the
value of that packet in an economic sense.  You don't have to use my
network, but I can put a price on it if you do. 

> In a capitalist economy, price generally follows value.

Scarcity creates value, hence the desire to differentiate.

However, my willingness to pay your network for transit directly depends
on the number of people that I can reach only (or better in some fashion,
including cheaper) through your network. 

> You seem to forget that carrying traffic is only a part of network
> service; in fact, a lot of _value_ is in the _ability_ to communicate
> universally.  That's what made Internet a killer to all those X.25
> networks.

Well, you have a point in there being value in the _ability_ to
communicate. That's why I'm willing to pay a limited entry fee of some
sort, i.e. buy a computer and connect to you in the first place.

Once I'm connected, however, transitting traffic through your network is
the only thing that I'm interested in. Why else would I want to connect to
your network? Of course, my desire to connect to you and my willingness to
pay you for transit increases with the number of people that I can reach
only or, if multi-connected, better in some fashion through your network.

> That's because he has (implied) obligation to provide adequate
> service during peak usage.

Peak usage? I wonder how usefull that concept is when it comes to packet

An simplified example. Lets say I have a direct T1 between A and B. A
starts to transfer 4 GBytes from B to A and uses 100% of the bandwidth. 
Then B starts another transfer of 4GBytes from A to B. Both now use 50% of
the bandwidth and each transfer takes twice as long. 

I can still telnet between the two locations, even play quake - the load
is hardly noticable for short transfers.

> > "Connection costs" is rent on transmission facilities, plus
> > overhead (upkeep of the property, insurance, administration, etc).
> >No. That's "transmission cost", not "connection cost". The cost of me
> >connecting to your network (not counting setup and so on) is the sum of
> >the interface electronics on both ends and whatever link we need
> >inbetween.
> Connection costs are generally figured into non-recurring charges.
> They usually do not exceed costs of equipment and overhead.

That was my point. Why charge a higher _recurring_ fee for a faster

> >Off on a tangent...  creating bandwidth is somewhat like making computer
> >chips.  Making the first production Pentium (or whatever) processor costs
> >billions.  The second is a few cents. Here, laying the cable is expensive.
> >Once it is in the ground, the cost for transporting another packet is
> >almost zero.
> This is an example of patently meaningless analogy.  _Every_ business
> (even pyramid scams) has some capital costs.  So what.

Why meaningless? There's no way to get the money back out once the cable
is in the ground or the chip is being fabricated.

> >Back to networks... it would be logical to assume that whenever people
> >deploy fiber they drop as much as they can afford at that moment.
> You will be surprised.  Sprint has 6 (six) strands of fiber in its
> trunks.  The cost of putting in 100 strands was purely incremental,
> but then, some beancounters figured that those six strands will be
> good forever.  Now, it's digging time again.

How do you know?

> >How much of it is being used?
> Practically all of it.  BTW, it is generally priced in DS-0 chunks;
> i.e. when you get a DS-1, you pay the same as for 24 DS-0s.

That pricing model is the problem. You are asked to pay for the potential
of transporting data, not for transporting data. Circuit switching's
heritage. Packet networks need a different pricing model.

> >Hey, a few Linux boxes interconnected with a few 100MB/sec
> >ethernet switches in the right fashion would allow the creation of a super
> >NAP that should outperform gigaswitches easily.
> Not _that_ simple.  I won't go into details on that; but so far the
> only known way to do that is pretty much covered by the pending patents.

Well, the key is some sort of any-to-any communication matrix for n
routers. If n is small, even ethernet switches will do.

> >Summary: I would not be surprised if the packet carrying capacity of the
> >Internet could be increased by two or three orders of magnitude with
> >surprisingly little investments. The real challenge is how to get people
> >to do that.
> Four orders.  Then something different is needed.

Hey, agreement... 


> --vadim

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