DrPeering -

Q: I have a question about how paid peering happens in practice. From the

following scenarios, which would you consider the most common?

1) A network X offers paid peering, where it is willing to peer with

another network, but expects to get paid. X sets a certain price for

the paid peering (how does X set this price? something less than X's

transit price?) and won't peer unless the other network pays that

price.

2) A network X is willing to participate in paid peering, where it can

both pay another network, or get paid. The outcome (whether X pays or

gets paid) and the paid peering price is subject to negotiations. In

this case, X could be paying for certain paid peering links, and

getting paid for others.

3) None of the above :) (in which case, what actually happens?)

Thanks much,

Amogh

A:  Paid Peering is like paying for a date to the prom; neither party has an incentive to talk about it. 

The buyer often wants others in the field to see it as having similar attractiveness as the peer (that it pays), and the seller of paid peering puts the paid relationship at risk if it discloses that it is actually being paid. At the end of the day, there is money exchanged but very few talk about it as this would defeat the purpose. [This surprisingly apt analogy came up at our Peering Workshop in Johannesburg last month.]

As for your three scenarios....

A few years back, AOL did scenario A, but the price was a little higher than the cost of transit. They argued it reflected the actual cost of delivery. They also correctly argued that it provided a higher performance path to the customers. The market balked at the price and very few purchased it.

Comcast today offers paid peering but price it competitively, and as mentioned in a previous article, those who purchased it say it performs well.

AT&T has offered paid peering as a stepping stone to peering approach for a long time as well.

It is worth pointing out that in both the AOL and Comcast paid peering tactic, free peering was available if some prerequisites were met (traffic volume, geographical distribution, consistent announcements, etc.)

The only time scenario #2 has come up has been in the telephony world (buying and selling minutes and settling one way or the other at the end of the month). I have never heard of this settlement system applied to Internet Peering. It would be like, to torture the analogy, you pay for a date to the prom, but at the end of the night, the two of you settle based on which one of you was more attractive to the party attendees. You would never get a truly attractive date to do this deal, and then how would you quantify value and could that be gamed? Doesn’t tend to happen.

And, for your none of the above scenario....The fallback to peering or paid peering has always been to reach the destinations via transit providers.

The Level 3 - Comcast Dispute

Since many folks have asked for opinions on the Level 3 - Comcast dispute, a related topic I will comment briefly here. I believe both sides have perfectly valid positions.  The parties have locked horns with the very human belief that their view is the “right” one and the other view is completely distorting reality.

The Level 3 - Comcast dispute highlights a fundamental flaw in the Internet architecture:

there is no mechanism for dollars to flow to where the bottlenecks are.

DrPeering@DrPeering.net