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A Business Case for Peering in 2004 (v0.7)

This white paper explores the benefits and costs of peering in the internet industry, comparing it to transit models and providing insights on optimal commit levels and cost savings. It also discusses the peering model and provides analysis on peering costs versus transit costs.

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A Business Case for Peering in 2004 (v0.7)

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  1. A Business Case for Peering in 2004 (v0.7) William B. Norton Co-Founder & Chief Technical Liaison Equinix, Inc. (V0.7), XChangePoint Europe October 28, 2005 Updated: Oct 26, 2004

  2. Internet Researcher • 90% externally focused • Many documents on Protocols • Lack of Operations documents • Research: Peering • How does Peering work? • What are the definitions? • What are the “Tricks of the Trade?” White paper process..

  3. Community Operations Research • “Ground Truth” w/dozens of experts • Write White Paper v0.1 • Walk community through WP for comments • Revise White Paper into new version • Present White Paper at conferences • Solicit comments over lunches and dinners White papers so far…

  4. Internet Operations White Papers • “Interconnection Strategies for ISPs” • “Internet Service Providers and Peering” • “A Business Case for Peering” • “The Art of Peering: The Peering Playbook” • “The Peering Simulation Game” • “Do ATM-based Internet Exchanges Make Sense Anymore?” • “Evolution of the U.S. Peering Ecosystem” • “Asia Pacific Peering Guidebook” • “A Business Case for Peering in 2004” Freely available. See Web site or send e-mail to wbn@equinix.com Or Google for “William B. Norton”

  5. Disclaimer: Building Models • There is nothing about Equinix in this presentation • We are simply building models here • All prices are estimates, averages, surveyed values, or made up • Your mileage may vary • Adjust the models to meet your situation • Also, this is an early draft

  6. Does Peering Make Sense Anymore?

  7. The 2004 U.S. Transit Model

  8. The Optimal Transit Model • What is the optimal commit level given an expected transit volume?

  9. Optimal Transit Model • What is the optimal commit level given an expected transit volume? • The 100% Heuristic • the Leo Transit Commit Heuristic “I Don’t want to pay for traffic I don’t use!”

  10. Compare 1M vs. 10M Commit Graphically…

  11. Comparing 1M and 10M Commit Compare the heuristics…

  12. Comparing Transit Commit Heuristics

  13. Cost Savings of Optimal Transit Same effect between 10 and 100M commits…

  14. 1M vs 10M vs 100M Commits Algebraically find the crossover point…

  15. Norton Heuristic Q: When do we commit to the next higher commitment level? A: At the Transit Breakeven Point (TBE) Plug in for T(c) and T(c+1) Plug in for V(c+1)

  16. Transit Breakeven Points

  17. The Peering Model Peering isn’t free…Monthly Costs include: • Local Loop fees (the cost to get in IX), • IX collocation fees, and • IX peering port fees. Also consider Equipment Costs which can be amortized into Monthly Cost Monthly Peering Costs=LL+IX+IXP+E But how do we compare Monthly Costs against $/Mbps per month?...

  18. Peering versus (Optimal) Transit 1) Normalize the Peering and Transit units $/Mbps (per month) Vs. Mbps Exchanged In Peering or Transit Relationship (Per month) All as 95th Percentile measures

  19. Peering vs. Transit at TV 2) Compare Peering at PV and Transit at TV

  20. Example: Peering vs. Optimal Transit Peering Cost: $9000/Month

  21. 2004 Peering vs. Transit • Model I – Have to build into IX • Monthly Peering costs • Local Loop • Peering Port • Rack Space • Peering Equipment • Model II – Already at IX • Monthly Peering Costs • Peering Port • Incremental Peering HW Peering Equipment costs…

  22. Peering Equipment Costs Sources: Richard Steenbergen (nLayer) And Patrick Gilmore (Akamai)

  23. Model I – Build into IX for 100M Peering Local Loop Assumptions: 100M Transport into IX: $1000 per month 1000M Transport into IX: $4000 per month Peering Rack & Port Assumptions: 100M w/ ½ rack at IX: $2500 per month 1000M w/ ½ rack at IX: $5000 per month Graphically: P vs.T…

  24. Model I – 100M Peering

  25. 100M Peering at the EPB Why peer when P>T?

  26. Why Peer when P100>T100 ? 1) Performance 2) Greater control over routing 3) Meeting Peering Prerequisites 4) Already at the IX 5) Marketing value 6) 100M Peering is a stepping stone 7) Currently paying high transit fees. 8) Peering Costs are immaterial.

  27. 100M Peering Revisited Assuming only 20%, at 33% peering is closer call. 4*100M=1000M, Peering at 1G…

  28. Model I – Build into IX for 1000M Peering Graphically P vs T…

  29. Peering Breakeven Analysis New vs. Used equipment?

  30. Model I – 1000M Peering – new vs. used Equipment doesn’t matter Project forward – when gigE fills…

  31. Adding 2nd gigE for Peering When does 10GE peering make sense?

  32. 10GigE Peering Model Graphically P v T…

  33. Model I – gigEs vs 10gigE Summary stats for Model I 10G Peering

  34. 10gigE Peering Metrics Traffic exchange for less than $5/Mbps and covering all costs of peering! Model II – What if I already have colo at an IX?

  35. Model II – Already at IX Colo

  36. Model II - 100M Peering Peering Port Fee Assumptions: 100M Port only: $1500 per month 1000M Port only: $4000 per month Graphically: P vs T…

  37. Model II – Peering 100M Ports Graphically 1000M and 10G Peering…

  38. Model II – 1000 and 10G Peering $1.92/Mbps

  39. Model II Summary Stats

  40. Summary • Transit Prices Plummeted • Does Peering Make Sense? • Decision Makers: Peering best compared against Optimal Transit • New vs. Used Peering Equipment doesn’t matter • Peering Scales Well in the gigabit ranges

  41. Acknowledgements I am grateful to Richard Steenbergen (nLayer) and Patrick Gilmore (Akamai) for their data points and insights during the initial development of the white paper models. I also thank John Hardie and Lane Patterson (Equinix), Scott Bradner (Harvard), Joe McGuckin (via.net), Leo Bicknell (AboveNet), Dave Woodelet (Shaw Fiber), Rich Collela (AOL), Dan Golding (Burton Group) for their suggestions.

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