Q: DrPeering -

When does it make sense to peer?

Internet transit is so inexpensive, I don't have the networking expertise in-house, and I am already understaffing my wildlife and wilderness content creation activities. Our traffic is growing towards 1 Gb per second (800Mbps actually), and we're looking at adding a second gigabit connection to the Internet. We are paying $10 per megabit per second, and I am confused about why your website says the prices close to three dollars per megabit per second. I look forward to hearing your advice.

Backwoods Ned.

A:

Ned - Thanks for giving me a holler. The “when does peering make sense?” question is the #1 question I get.

The price of transit varies widely in any particular Internet peering ecosystem. For example, in some parts of rural Texas, I am still hearing about transit prices closer to $60 per megabit per second. In these cases, the prices are high because there is little competition, and it is just expensive to get out into the rural communities. Historically, we have seen the prices drop significantly once competition enters a particular part of the ecosystem. For example, as soon as Level 3 expanded across Europe, the Internet service providers in those areas immediately dropped their prices below the point where Level 3 could recoup its investment. This is of course a very aggressive competitive situation, but it illustrates the potentially powerful effect on pricing when there is competition in the Internet peering ecosystem.

Given your situation I will also highlight a couple of things that make me NOT engage in peering. While the price of transit might appear to be high, the fact that you are only doing 800 Mb per second worth of traffic suggests to me that it may be more expensive to expand your network into an exchange point and try and peer your traffic away. Here is the math:

800 Mb per second times $10 per megabit per second equals $8000 per month.

This means, for peering to make sense, that you need to spend less than $8000 per month for a transport circuits, rack space, a gigabit peering port, and the router.  If it costs $1000/mo for a gigE circuit, $1000/mo for a half rack, $1000/mo for the port and $1000/mo for the equipment, You can change the numbers of course, but in this circumstance, you will need $4000/mo in cost savings to cover the $4000/mo in the monthly costs of peering by the cost savings by peering for a while.

Shown another way, if you take that $4000/month in peering costs and peer a lot of traffic over that infrastructure, you see that the cost of peering goes down as shown in the table below.  At 400Mbps you should be indifferent from a purely financial perspective between peering and buying that $10/Mbps transit.

  

The Cost of Peering Backwoods Ned’s Traffic

You have to be able to peer 400Mbps of your traffic away (50% of your traffic) using this infrastructure. I think you'll unlikely be able to do this anytime soon.

Given that networking isn’t your core competence, nor is it strategic to your content delivery, peering is probably not a good fit here.

I would, however, should suggest that you take a look at the market, and see if you can get that second Gb on a different Internet service provider. In this way you can multi-home your network and perhaps manage your traffic better across these two ISPs. Do this before getting into the next stage of complexity with peering.

Once you are comfortable with multi-homing and your traffic volume grows, you might consider buying your transit at a network dense colocation facility. The prices could be as much as 30% less and it would be the stepping stone to peering at a later date. We can do that math in a future column.

Best of luck Ned and Happy Holidays !

I hope this helps.

DrPeering@DrPeering.net