1. A Business Case for Peering
William B. Norton
Co-Founder and Chief Technical Liaison
July 17th, 2001
Gigabit Peering Forum III
Dallas, TX

2. Motivation “Internet Service Providers and Peering”
2 year study of Peering Coordinators
Document Process, Mindset, Strategies
Documented Peering Processes
Learned a lot about Peering Coordinators
Peering Coordinators Professionals

3. Peering is a game of relationships

4. “Internet Service Providers and Peering” White Paper
Documents:
The Motivations of Peering Coordinators
The 3 Stage Generalized Process of Peering
1) Identification of Peering Candidates
2) Negotiation of Peering
3) Implementation of Peering
Exchange Point Selection Criteria
Copies available here today

5. A Business Case for ISP Peering
Overcome the CFO Hurdle:
“Why should I spend money on these non-revenue generating activities?”
“I think you engineers just want more toys to play with.”
“Convince me this makes business sense”
CFO argument…<comments>…

6. Pretend you are the CFO…
Presentation Outline:
Definitions
Transit & Peering Terminology and Financial Cost Models
Motivations for Peering
Save Money and Improve Network Efficiency
Introduction to the Peering Breakeven Analysis
Specific Examples leading to Generalizations
“A Business Case for Peering”
Peering Break Even analysis
Available as a White Paper…

7. Definitions Transit Peering Effective Peering Bandwidth
Gives us tools (lexicon) to facilitate discussion
Market Confusion over misuse of terms:
Terminology critical to have meaningful discussion on Peering
Transit
Peering
Effective Peering Bandwidth

8. Understand that… The Internet is a network of networks
Internet Service Providers sell access to the Internet
Internet Service Providers must themselves connect to the Internet.
How do they connect to the rest of the Internet?

9. Definition of Transit Upstream Transit Providers Upstream TransitW O K S
Upstream
Transit
Providers
Upstream
Transit
Provider
Upstream
Transit
Provider
Upstream
Transit
Provider
Definition of Transit
Def: Transit is the business relationship whereby one ISP
announces (sells) reachability to the *entire* Internet to a customer.
2) Reachability
Announcement
ISP A
1) ISP A buys Transit Service
3) Traffic Flows
$$$ ? Typically usage-based
Pricing ’01: $100-$1200/Mbps
Volume based on 95th Percentile measure
Transit is Simple, Convenient:
Upstream handles the delivery of packets
to the Internet by some means

10. Cost of Transit Traffic Exchange
* Source: Wolfgang Tremmel (Via Net.works), UC quote as well
Traffic Volume increasing

11. Traffic Volume Increasing
Streaming Media
Yahoo! Broadcast: 100,000 concurrent unicast streams
15 million streaming hrs/mo, 1300 Live events/day U P S T R E A M
Streaming:
Broadcast
Telephony
Video
Multimedia
Interactive
Gaming
SPOT Events IG B M
$$$ T
Content Heavy ISP V
$$$
Access Heavy ISP
56k
384k
1.5m
1 T1 consumer streaming 24/7 cost ~$400/mo in transit
Why not just buy transit?

12. Why Not just buy transit? Motivations for Peering:
Financial: Reduce load on expensive Transit service
Traffic src/dest
Measure vs Intuit
Usage-based Billing
Engineering: Lower latency
1st Stage of Peering:
Top 10 destination ISP list
Transit
$$$
ISP A
Transit ISP
Seek transport
Interconnection $ x
ISP B
Transit
$$$
Sample Top 10…

13. Sample Top 10 Destination List
Def: Peering

14. Definition of Peering Routing Tables
Def: Peering is the business relationship whereby ISPs
reciprocally announce reachability to each others’ transit customers.
Peering
Peering
WestNet
USNet
EastNet
Routing
Tables
Transit
Peering is *not* a transitive relationship
Peering *does not* provide access to the entire Internet
Usage: “I buy transit from Genuity and Peer with EastNet, WestNet.”
Cost of Peering: Def. Transport+Port

15. Cost Components of Peering
Example: Dallas

16. Dallas Market Prices for Peering1)
Transport into
Transit $$$
Exchange
ISP A
2) Rack Space at
Exchange Point
For Router
½ rack $1000/mo R
Transit ISP X
3) Switch Port on R
Public Peering Fabric
(100M
GigE)
Transit $$$
Total Cost of Peering
ISP B
$2500/month
Which is more cost effective?
Peering or Transit?
Price Quotes Averaged from AT&T, Time Warner, Level 3, Cogent, and Telseon, Equinix

17. Cost of Traffic Exchange Peering vs. solely Transit
~ $400/Mbps
Peering $
1 Mbps
ISP A
1 Mbps
Cost of Peering:
$2500/month R
Transit ISP X R
Unit Cost of Traffic Exchange
In Peering Relationship:
$2500=$2500 per Mbps
1 Mbps
ISP B

18. Cost of Traffic Exchange Peering vs. solely Transit
~ $400/Mbps
Peering $
2 Mbps
ISP A
2 Mbps
Cost of Peering:
$2500/month R
Transit ISP X R
Unit Cost of Traffic Exchange
In Peering Relationship:
$2500=$1250 per Mbps
2 Mbps
ISP B

19. Cost of Traffic Exchange Peering vs. solely Transit
~ $400/Mbps
Peering $
6 Mbps
ISP A
6 Mbps
Cost of Peering:
$2500/month R
Transit ISP X R
Unit Cost of Traffic Exchange
In Peering Relationship:
$2500=$416 per Mbps
6 Mbps
ISP B

20. Traffic Exchange Cost Per Mbps via Peering in Dallas
(FIXED)
Graph over DS3 BW

21. Traffic Exchange Cost Per Mbps with Peering
Effective
Peering BW
Min Cost…
Note Well: Transit and Peering are *not* perfect substitutes
 As traffic volumes increase, the benefits of peering increase.

22. Effective Peering Bandwidth and Minimum Cost for Traffic Exchange
DS-3/100M=$2500=$55/Mbps
OC-3/100M=$3850=$38.50/Mbps
OC-12/1000M=$10,000=$16/Mbps
Min Transit Cost: ~$300/Mbps

23. Def: “Effective Peering Bandwidth”
1Gbps
1Gbps
1Gbps
PORTS
100M
Maximum bandwidth available for peering
=Min(transportBW, peeringBW)
Exchange
C I R C U I T S
OC-48
(2.4Gbps)
DS3 (45Mbps)
OC-12 (622Mbps)
OC-3 (155Mbps)

24. Generalization: ISP Peering Breakeven Analysis Graphs
$/Mbps
Exchanged
Breakeven Point
(ISPs Indifferent between
Peering and Transit
traffic exchange)
Peering
Risk
Prefer Peering
Cost of Transit
Cost of Traffic Exchange in Peering Relationship
Number of Mbps exchanged

25. Top 5 Reasons not to Peer
1) Already get Traffic for “free” (through existing peering relationships)
Transit
$$$
Yahoo!
Transit ISP
EXODUS
Peering $
AOL

26. Large Global Network Provider
Top 5 Reasons not to Peer
Huge investment in Int’s circuits,
100’s of routers and colo sites,
Staff installs, peering negotiations,
Millions of customers, etc.
2) Not True Peers
Traffic inequity
Scale inequity
Not even investments in infrastructure
Form: “I don’t want to haul your traffic around the globe”
Large Global Network Provider
Small
Regional
Player

27. Top 5 Reasons Not to Peer 3) Lack of Technical Competence
Troubleshooting network problems takes longer when the other ISP NOC and engineers lack the technical expertise during an outage…

28. Top 5 Reasons Not to Peer 4) Transit Sales Preferred
We rather sell you transit…“Let me introduce you to our sales guys”

29. Top 5 Reasons Not to Peer 5) BGP is Tough
“BGP? No ExpertiseNo measurements No Justification to hire expertsBGP?”
Simple
Complex
Conceptual Hurdle
Conceptual Hurdle
Primary
Backup
Transit
Primary
Backup
Transit
6: personality

30. Top 5 Reasons Not To Peer 5+ Personality Clashes:
They don’t understand each other
and they didn’t like the interaction

31. Side Effect: Transit Aggregation
C&W
Sprint c
Genuity
AT&T
C&W
UUNet
Sprint
Genuity
UUNet
AT&T c
$250/mo
Aggregation
Effect c c c
Local Loops,
$37,500/mo
Dark Fiber Diverse Path: $12,000

32. Conclusions
ISP Peering makes sense if you can offload X Mbps of traffic to peers…
The “Peering Breakeven Analysis” identifies the breakeven point.
“Effective Peering Bandwidth”=Min(TransportBW,PortBW)
“A Business Case for ISP Peering” available