DrPeering -

What is transit going for in the U.S. ? At what point do peering not make sense anymore?

Cat D’etat

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Cat - I will share some data from an early draft report: Internet Transit Pricing - Historical and Projected along with one prognosis for the peering industry.

First, here is are the DrPeering historical and projected transit prices for the next few years in the U.S.:

When does Internet Peering Make Sense?

What does this table show? Transit Prices are dropping, and the range where public peering makes sense is getting narrower over time.

If you assume the cost of public peering is $10,000/month ($2500 for a 10G public peering port and $7500 for colo, power, transport, equipment, etc.), you see that in 2010, peering makes sense financially if you can peer away at least 2Gbps (2000Mbps) for free to your peers. This gives you plenty of breathing room to peer traffic away for less than the price of transit, up to 7.6Gbps (7600Mbps), which is approximately the amount of traffic one can reasonably sustain over a 10G peering port. But this is for 2010 with an average transit price of $5/Mbps.

With these pricing estimates we see that in 2012, peering still makes sense, but with an average Internet Transit price of $2.34/Mbps, we see a peering break even point of 4274Mbps where peering begins to make sense. Beyond this point, peering makes sense financially up to 7.6Gbps, the capacity of the pipe.

This is not much of a range; getting peering traffic volumes to fit in this range is tricky, so peering folks will mostly likely not go forward with public peering (all things remaining equal).

As fewer and fewer ISPs publicly peer, the rationale for public peering to aggregate smaller peering sessions together over a public peering fabric diminishes. And the technology is not well suited today to handle massive peering sessions over public peering fabrics.

As a result, Private Peering will dominate the peering ecosystem in the U.S. by 2012. Point to point fiber is just too cost effective, reliable, and ease to deploy to compete with.

It is certainly possible that the pricing of IX ports will drop, but the U.S. has been slow to do that compared with the European IXes who have consistently led the charge in dropping peering port fees.

Take a look and I would love to hear your feedback on the early draft of the report:

http://peering.drpeering.net/white-papers/Internet-Transit-Prices-Historical-And-Projected.html

There are some other predictions in the report

1. 1)The U.S. Peering Sector will refocus on Video Distribution Companies, High Performance Network Services Sector, while maintaining customers that simply stick around,
   

2. 2)ISPs and CDNs will morph into higher value service providers or die,
   

3. 3)Access Networks grow in power in the Peering Ecosystem, and
   

4. 4)Cooperative inter-AS services may bridge the gap.
   

All of these predictions are of course 100% guaranteed to come true or your RSS feed is free!

Dr Peering

DrPeering@DrPeering.net

P.S. - Several have asked for a 100G Public Peering Port break even analysis. We will do this in the next article.