Peering on a Handshake?

The OECD’s Rudolf Van der Berg posted a fascinating article this morning over on the OECD Insights blog summarizing a few tidbits of a recent report on traffic exchange and peering between today’s networks. Did you know that more than 99.5% of traffic exchange agreements are nothing more than a handshake, with no written or formal agreement at all?

Peering tends to have a rough and tumble reputation due to the rare but high profile peering wars that break out between major backbones every few years. But the point made by the OECD report is that it’s actually a very efficient system that completely shames the highly regulated and litigious world of TDM interconnection.

Just think about the amount of traffic that traverses the internet now, the speed of its growth, and the mobile revolution that is currently reshaping it. It’s really quite impressive how few partition incidents the current peering/transit milieu has experienced.  But the OECD report goes further, giving today’s traffic interconnection ecosystem credit for reducing costs and thus allowing the internet to scale effectively.

In fact, according to some I have talked to, a major thing thing holding back competitive bandwidth pricing in many emerging markets is often the lack of local peering infrastructure. Where the major players don’t directly exchange lots of traffic on some sort of mutually acceptable terms, they each have to send traffic internationally that would be more economical to keep local, which keeps costs high. Turkey and Russia are two such examples, but there are others of course.

Of course, when counting by number of agreements, the smaller ones tend to dominate the statistics. Hence, that last 0.5% surely reflects a proportionally larger percentage of the actually traffic exchanged. Certainly most of the large backbones are more formal about their peering agreements. And still out there somewhat unresolved (as far as I know) is the dispute between Level 3 and Comcast.  But at least it hasn’t escalated to other last mile providers, so perhaps the market is having some luck unraveling this knot as well.

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Categories: Government Regulations · Internet Traffic