Backbone IP network Economics - peering and transit

Tue Apr 20 14:32:50 UTC 2004

On 4/20/04 1:34 AM, "Michel Py" <michel at arneill-py.sacramento.ca.us> wrote:

> 
>> Patrick W.Gilmore wrote:
>> Unless they have cheap access to a free NAP (TorIX, SIX, etc.),
>> transit, even at higher prices, is probably be the best /
>> cheapest way to reach the Internet.
> 
> This is true, but there are plenty of other opportunities for peering,
> such as: both parties buy DS-3 class transit from the same tier-2 or
> even maybe tier-3 provider in a colo (which will likely be a BFM, other
> problem) not a formal IX. In other words, peering in an IX does cost
> money, but peering at a colo might not, as these messy colos are mostly
> unmanaged and nobody cares about that 25ft cross-over cable :-)
> 
> Michel.
> 
> 

This is a classical mistake. Peering always costs money and its never free.
The question is, how much, and is it cheaper than transit?

Costs incurred in peering:

- Port Costs (capex)
- A share of a router's backplane capacity corresponding to the port
- Cross connect costs (one time or recurring)
- Operational costs such as legal review for BLPAs, NOC monitoring,
troubleshooting when it flaps, putting MD5 on, etc
- Administration
- Public Switch costs

It is difficult to defend peering strategies today unless your network is of
a fairly significant size (gigabits of traffic) and you are collocated in an
advantageous location(s). Otherwise, low cost transit is hard to beat.

Some of the low cost transit providers will not last, and there WILL be a
second round of bankruptcies and consolidations - Googin's words should be
heeded. However, if you are multihomed and have sufficient transit diversity
(and you don't assume any local loop liabilities), the low cost transit
should be exploited while it lasts.

-- 
Daniel Golding
Network and Telecommunications Strategies
Burton Group