Who Pays Whom?: User – DSL Provider – Transit – Video Portal – Reloaded

About a year ago I had a post under the same title in which I tried to figure out who paid whom on the Internet. At the time I got a lot of responses with insightful information and while those helped to form a better picture I was still a bit at a loss what was going in. Then recently, a co-worker sent me a link to a book on the topic (thanks Christian!) – 'The Internet Peering Playbook : Connecting to the Core of the Internet'. The epub and pdf version is available for $10. Needless to say I could not resist and ordered a copy via a Paypal transfer. An hour later I had the ebook in my (virtual) hands and began to read eagerly.
The book is a joy to read and I managed to get through the first half which contained the information I was mainly interested in in a couple of hours. There are many examples that translate theory into practice and here are some notes that are my takeaway. Perhaps they make sense to you as well despite their brevity or perhaps it's a trigger to find out more. So here we go:

To better understand how the different networks that the Internet is comprised of connect with each other, one has to be aware of the different kind of connection types:

Internet Transit: The first type that I've also mentioned in my blog post a year ago is a 'Transit' connection in which one party, e.g. the DSL/cable access network provider, pays a backbone network for connectivity to the rest of the Internet. Transit routes are the 'default' route to which everything is routed to and from that can't be sent and received from any other network interface. Typically, DSL and cable providers pay for such connectivity and prices in 2014 are typically in the area of  the tens of cents per Megabit per second.

Peering: The second type of connectivity is referred to as 'Peering'. Peering is usually employed in the backbone between two backbone networks that transmit and receive about the same amount of data to each other. As the traffic is about equal in each direction, no monetary compensation is exchanged between the two parties, it's a deal among equals. Instead, each part pays the costs for its side of the interconnection. Usually an Internet Exchange Point (IXP) to which many dozens of networks connect is used for this purpose. Once two networks that have a link to an IXP agree to connect, a peering connection can be set up by establishing a route through the public IPX packet exchange matrix between the two optical ports of the two networks. It's also possible to physically connect the two networks together with a dedicated link in the IPX which is called private peering. It's also common that two networks decide to peer at more than a single IXP location. Whether two networks peer with each other or if one of the parties pays for transit (to another backbone network) to reach that network seems to be not only a matter of an equal amount of data exchanged but also of psychology. The book contains interesting examples of the tactics employed by peering managers to move from transit to a network (via another network that is paid for the transit) to a direct peering connection.

Paid Peering: The third type is 'Paid Peering'. In this variant, two networks decide to interconnect but unlike the normal peering described above, one party pays the other for the connection. Paid Peering is different from Transit because while Transit provides a default route to the Internet, Paid Peering only offers routes between the two networks and potentially subnets which are paying for Transit to those networks.

There we go, that's the three interconnection types that exist in practice. In a follow up blog post I'll focus on Paid Peering, Who Pays Whom and Why. Stay tuned…