Observations of an Internet Middleman (Level3) (was: RIP Network Neutrality (was: Wow its been quiet here...

Matthew Petach mpetach at netflight.com
Wed May 14 08:11:30 UTC 2014

On Sat, May 10, 2014 at 8:04 AM, Rick Astley <jnanog at gmail.com> wrote:

> [...]
> The reality is an increasingly directly peered Internet doesn't sit well if
> you are in the business of being the middle man. Now if you will, why do
> transit companies themselves charge content companies to deliver bits? How
> is it fair to be in the business of charging companies to receive their
> bits and hand them to a settlement free peer on the hook to deliver them,
> but not fair for content to just bypass the transit company and enter a
> paid peering agreement with the company delivering the bits? In this case
> paid peering is mutually beneficial to both companies involved and is
> typically cheaper for the content company than it would cost to send that
> traffic over transit.

What you're missing is that the transit provider is
selling full routes.  The access network is selling
paid peering, which is a tiny fraction of the routes.
If I pay transit provider X $10/mb (i know, not realistic,
but it makes my math work) to reach the entire internet,
it might seem reasonable to pay access network C $5/mb
to hand traffic to them, and bypass the transit provider,
avoiding potentially congested links.

But then access network A decides they want to cut out
the middleman as well--so they do the same thing, run
their ports to transit provider X hot; to avoid that, I can
pay the cheap price of $4/mb to reach them.

Now access networks F and D want to do the same thing;
their prices for their routes are $4 and $5/mb, respectively.

Finally, little access provider T wants in at $2/mb for their

So, at the end of the week, I *had* been paying $10/mb to
send traffic through transit to reach the whole rest of the
internet.  Now, I'm paying $5+$4+$4+$5+$2, or $30, and
I don't have a full set of routes, so I've still got to keep
paying the transit provider as well at $10.  Depending on
port counts, locations, and commit volumes, your "typically
cheaper for the content company than it would cost to send
that traffic over transit" has flown completely out the window.
It could even end up being many times more expensive to
handle the traffic that way.

In order for the costs to work out, you'd really need
to apply a formula along the lines of
C(n) <= T(n) * C(t)
T(n) =fraction of traffic volume destined for access network X
C(t)=cost of transit (ie, full routes, reachability to the entire internet)
C(n)=cost of paid peering to access network X

So, if you're an access network and want to charge
for paid peering, and you represent 1/20th of my
traffic, there's no reason for me to pay more than
1/20th of my transit cost for your routes; otherwise,
it's more cost effective for me as a business to
continue to pay a transit provider.

I'm constantly amazed at how access networks
think they can charge 2/3 the price of full transit
for just their routes when they represent less than
1/10th of the overall traffic volume.  The math just
doesn't work out.  It's nothing about being tier 1, or
bigger than someone else; it's just math, pure and

(currently not being paid by anyone for my time
or thoughts, so take what I'm saying as purely
my own thoughts on the matter, nothing more)

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