Are the Settlement-Free Peering Policy Requirements for ISPs and CDNs Based on Network Costs?
TPRC50: The 50th Research Conference on Communication, Information and Internet Policy
22 Pages Posted: 2 Aug 2022 Last revised: 3 Feb 2023
Date Written: August 1, 2022
Peering is an interconnection arrangement between two networks for the purpose of exchanging traffic between these networks and their customers. Two networks will agree to settlement-free peering if this arrangement is superior for both parties compared to alternative arrangements including paid peering or transit. The conventional wisdom is that two networks agree to settlement-free peering if they receive an approximately equal value from the arrangement. Historically, settlement-free peering was only common amongst tier-1 networks, and these networks commonly require peering at a minimum specified number of interconnection points and only when the traffic ratio is within specified bounds. However, the academic literature does not explain how these requirements relate to the value to each network. More recently, settlement-free peering and paid peering have become common between ISPs and CDNs.
In this paper, we construct a network cost model to understand the rationality of common requirements on the number and location of interconnection points. We also wish to understand if it is rational to apply these requirements to interconnection between an ISP and a CDN. We construct a model of ISP traffic-sensitive network costs. We consider an ISP that offers service across the US. We parameterize the model using statistics about the population and locations of people in the contiguous US. We consider peering at the locations of the largest interconnection points in the US. We model traffic-sensitive network costs in the ISP’s backbone network, middle-mile networks, and access networks. These costs are thus functions of routing policies, distances, and traffic volumes.
To qualify for settlement-free peering, large ISPs commonly require peering at a minimum of 4 to 8 mutually agreeable interconnection points. The academic literature provides little insight into this requirement or how it is related to cost. We show that the traffic-sensitive network cost decreases as the number of interconnection points increases, but with decreasing returns. The requirement to peer at 4 to 8 interconnection points is thus rational, and requiring interconnection at more than 8 points is of little value.
Finally, we turn to interconnection between an ISP and a CDN. Large ISPs often assert that CDNs should meet the same requirements on the number of interconnection points and traffic ratio to qualify for settlement-free peering. We show that if the CDN delivers traffic to the ISP locally, then a requirement to interconnect at a minimum number of interconnection points is rational, but a limit on the traffic ratio is not rational. We also show that if the CDN delivers traffic using hot potato routing, the ISP is unlikely to perceive sufficient value to offer settlement-free peering.
Keywords: Broadband, Regulation, Net Neutrality, Interconnection, Peering
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