Internet Service Providers (ISPs) use different models for interconnection pricing, depending on the specific characteristics of the ISPs concerned. Broadly, ISPs can either:
Peering
Peering, also known as “Sender Keep All” or “Bill and Keep” is a zero compensation arrangement by which two ISPs agree to exchange traffic at no charge. This kind of arrangement makes sense where the two ISPs have roughly the same characteristics and traffic volumes, such that net financial burden from traffic flows between them is likely to be small.
The process by which an ISP qualifies for peering remains private. ISPs negotiate terms and conditions privately. They only rarely publicly disclose the criteria they use to qualify for peering. However, several Tier-2 ISPs have posted general qualifications for agreements to peer on their web sites. As an example, SBC’s conditions for domestic peering in the United States are summarized in the Box below. These conditions emphasize network coverage, volume of traffic, and 24 hour a day network maintenance capability. These criteria are probably more liberal than a Tier-1 ISP would require.
| SBC Conditions for United States Domestic Peering
1. For domestic ISPs coast-to-coast nationwide OC-12 or larger public IP backbone network.
2. Presence at three or more public peering points (at least one on the East Coast, one on the West Coast, and one in the Mid West) for domestic ISPs.
3. Presence at two or more public peering points for International ISPs.
4. A total minimum busy hour traffic exchange of 25 Mbps with SBC Internet’s Autonomous System Numbers will be required.
5. Must not have been an IP transit customer of SBC Internet in the past six (6) months.
6. Willingness to enter into a Bilateral Interconnection Agreement and Non-Disclosure Agreement with SBC Internet.
7. Operation of a 24x7x365 Network Operations Center (NOC) that proactively monitors all peering connections and provides an escalation path to quickly identify and resolve network problems.
8. No requirement for a balanced traffic exchange ratio due primarily to the asymmetric nature of current broadband metallic transmission systems such as ADSL and cable modems and of current Internet Data Centers.
9. Joint capacity planning reviews for interconnection augmentation to accommodate traffic growth and minimize the possibility of latency or packet loss between both networks.
10. Consistent routes announcements at all public peering points. |
Transit
Transit is an arrangement in which larger ISPs sell access to their networks, their customers, and other ISP networks with which they had negotiated access agreements.
Under a transit arrangement, the sender pays the full cost of interconnection. Transit charges are set by commercial negotiation, and are generally not disclosed.
Internet transit access arrangements provide a much greater geographical access than telecommunications transit arrangements. In telecommunications, transit arrangements typically secure an indirect link to one carrier in one location (primarily because a small carrier is unable to secure a direct link). Internet transit arrangements typically provide access to a vast array of networks, not limited to one country.
At the extreme, one Internet transit payment arrangement with one major Tier-1 ISP can provide a small, remote ISP with access to the Rest of the World. This is because the Tier-1 ISP has ubiquitous access and so can provide extensive routing opportunities.
RELATED INFORMATION
A Comparison of Telecommunications and Internet Cost Recovery
Implications of VoIP for Interconnection Pricing
Pricing Mechanisms for VoIP Interconnection
Criteria for a New Interconnection Regime