Q: DrPeering -

I have a new transit tactic for your Internet Peering Playbook. It is similar to “Tactic 5 - Play the Market” and “Tactic 4 Renegotiate multi-year contracts.”

First, understand that we have 20-30Gbps of content to ship off to transit providers.

We could of course lock in a good price from a couple of transit providers, but that would lock us in to the metered price for the duration of the contract. Instead, we purchase transit from a field of transit providers, committing only to 1Gbps each on a 10Gbps circuit.

To see how this works, assume that the market price for transit is $2.50/Mbps and that each ISP has a price for traffic that bursts over the commit (i.e. it is not capped).

At the beginning of the month, we ask each ISP for their best burst price so we could decide who would receive the revenue for the remaining 13 Gbps. The answers come back as shown below between $2.00/Mbps and $2.70/Mbps.

For the rest of the month, care is taken to meet the 1 Gbps commitments while sending the bulk of the remaining traffic only to those with low burst prices as shown below.

At the end of the month, the ISPs that did not receive any burst traffic are given the chance to lower their burst price and receive more traffic and revenue next month.

In this way, we are able to keep the (burst) prices of transit dropping for the duration of the contract.

The other thing that we do is insist on only 1-year or 18-month terms.  We have been very effective in this market at turning the thumb screws on the transit providers in the market. Keeping the duration short gives us more opportunities to negotiate the 1Gbps commit price.

This maneuver has worked well for us and would complement the other tactics in the book. Thanks for your consideration -

-- @aDbCc

A:

Thanks for this. I am adding it to the 2nd edition of the playbook. If you are willing to be cited as the contributor, please let me know.

DrPeering@DrPeering.net