Leaving public peering?

Leo Bicknell bicknell at ufp.org
Wed Dec 2 15:20:20 CST 2009


In a message written on Wed, Dec 02, 2009 at 12:46:46PM -0800, Lasher, Donn wrote:
> I realized that paid transit is down at almost obscene levels, but is
> that enough of a reason to increase hop-count, latencies, etc?
> 
> Why disconnect from public mostly-free peering?

Let's look at some economics.  I'm going to pick on some folks here,
solely because they have prices online and because they are, I feel,
representative prices.

http://www.cogentco.com/us/

"Home of the $4 Megabit!"  So we have transit prices at $4 per megabit.

http://www.de-cix.net/content/services/public-peering.html

A 1GE link to the exchange is 1000 euro per month, which is $1505 USD at
the moment, let's call it $1500 for round numbers.

Now, your 1GE exchange port really shouldn't be run past 60% or so, if
you want to provide good service.  So it's really $1500 for 600Mbits,
or $2.50 per Megabit.

If you're an ISP you look at this and go, humm, I take in $4 from my
customer, and hand $2.50 of it right back out to an exchange operator
if I use public peering, making the exchange 62% of my costs right up
front.  On the other hand, if I choose wisely where I private peer I
can do it at places with a one-time fee for the cable, so there is
$0 in MRC.  I have to buy a router port, sure, but it's also $0 MRC,
just a capital asset that can get written off over many years.

This is the math with the $4 megabit advertised price.  The halls at
Nanog are awash in $2 a megabit rumors if you have large enough commits
(say, a few 10GE's).  Taking in $2 and paying the exchange operator
$2.50 of it....well, that's not so good. :)

Transit prices have fallen enough that MRC's for switch ports, and
even MRC's for fiber runs (are any of you still in a colo that wants
$500 a month for a fiber run, I didn't think so) are eating up huge
chunks of the inbound revenue, and thus just don't make sense.

Now, before someone points it out, yes, DECIX's rate per megabit is
lower on a 10GE and a second port, so if you can move 2 ports of 10GE of
traffic you can make it a lot cheaper.  Also, Cogents $4 a megabit is
probably predicated on you being in the right location and having the
right commit, if you need a DS-3 in West Nowhere you'll pay a higher
rate, and that helps offset some of the costs.  I've oversimplified, and
it's a very complex problem for most providers; however I know many are
looking at the fees for peering ports go from being in the noise to a
huge part of their cost structure and that doesn't work.

-- 
       Leo Bicknell - bicknell at ufp.org - CCIE 3440
        PGP keys at http://www.ufp.org/~bicknell/
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