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Paid Peering: Issues and Misunderstandings

Recently I was asked for my opinion on Google paying France Telecom (FT) to deliver traffic into FT’s network, i.e. Google paying to peer with FT. I wasn’t aware Google pays FT. I don’t even know if it’s true. But I do know this is a topic fraught with misunderstandings. Also, if there is a “problem” here, the problem is one of competition (or lack thereof) in portions of the French broadband access market. It is not a problem that can be or should be fixed by “network neutrality” regulations or legislation.

To understand what’s happening, you need to understand the Internet’s business model and you need to know something about peering as it works in the real world.

The most succinct definition of the Internet I’m aware of is: Internet (n.) A voluntary agreement among network operators to exchange traffic for their mutual benefit.

This is very different from the telephone networks (fixed or mobile) where relations between operators are governed by laws and regulations, change at a regulatory pace, i.e. decades, and are continuously gamed by political processes.

Each Internet operator needs to be able to reach all possible Internet addresses, so interconnection is essential. If you are a small operator, like netBlazr, you purchase “Internet transit” services from a larger operator. Rates are volume dependent and arrangements are similar to those of any other business or individual purchasing an Internet access service. If you are a large operator, a large content provider or a very large business, then interconnection costs and arrangements become negotiable. Two operators in Holland will likely agree to exchange that portion of their respective traffic that is destined for each other’s networks at the AMS-IX which is local, rather than pay for Internet transit services that would likely carry that traffic to London or the US where a higher tier operator would handle the exchange. Thus the two Dutch operators engage in peering for that portion of their traffic for which it makes sense.

This pattern is repeated throughout the Internet as each operator evaluates where, how, and with whom it makes sense to exchange portions of their traffic so as to minimize costs, increase performance or achieve other goals important to that operator. Thus there are vastly more interconnection contracts, formed under more diverse terms, for the Internet than ever was the case for the telephone network. Further, this network of agreements is in constant flux as individual operators find better deals.

It’s instructive to follow the growth of YouTube from their founding through their acquisition by Google. When YouTube began, they had to pay standard rates for Internet access. As they grew to be a significant content source, their cost of Internet access fell as more and more operators asked to peer with them, as I discussed two years ago.

So between Google and France Telecom, who has negotiating leverage? and why?

France Telecom already has peering agreements with multiple other Internet backbones, so their customers have several paths to get to Google content. Why would either party want to connect directly?

First, it might cut costs. Whatever pre-agreement path the traffic takes involves some cost. Perhaps that’s money paid to other operators or it may just be the cost of maintaining the facilities needed for the pre-agreement traffic (e.g. to go via London). I can’t guess the specifics for Google or for France Telecom, but each has a possible interest here.

Second, it will likely improve performance. Even shaving 50 milliseconds off of round trip times (RTT) can improve user experience as accessing a single web page can require the exchange of dozens of messages, thus 50 ms less RTT can shave more than a second off the page load time. In a competitive market, France Telecom might want to advertise their network as the “fastest,” but local access competition is not that great in France (or in many markets, like the US). France Telecom has nearly 50% market share. They are losing ground to Free, but apparently it’s not enough to justify a marketing campaign based on the “fastest” network. Google on the other hand, has a strong reason to want better user experiences. In Google experiments with search latency, longer latencies reduce the number of searches a user does per day. Given the number of Google search users on the France Telecom network, Google can directly compute their monetary return from cutting search latency by X ms. So Google’s negotiators have hard numbers in their back pocket when they go to talk with France Telecom.

Is this good or bad? Well, if France Telecom doesn’t have to compete on the performance of their service, that suggests a failure of competition policy. But then a solution should address competition in the French Internet access market, not government regulation of peering or the imposition of “network neutrality” regulations on operators that don’t have a monopoly position.

For myself, I look forward to continued growth of new providers in France, like Free, as I discussed in the January issue of NGN Magazine.

By Brough Turner, Founder & CTO at netBlazr

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CDNs aren't "The Internet" Richard Bennett  –  Apr 27, 2011 12:55 AM

Traditional peering agreements involved networks of similar size and scope. They represented the mutual benefits of sharing similar facilities.

The disputes between CDNs and ISPs have a different character, insofar as the ISP doesn’t gain any direct benefit from the CDN in terms of offloading traffic. The CDN/ISP agreements only work one way. In that respect, they’re more like traditional transit (in reverse) than traditional peering.

Free.fr is an over-the-top services provider, more like a Netflix than an ISP. Their economy depends on a regulator’s willingness to allow them below-cost access to France Telecom’s physical network. People who have actually used their service are much less impressed with its quality than Americans are.

GGC Frank Bulk  –  Apr 27, 2011 11:52 AM

Don’t you think an operator such as France Telecom has a Google Global Cache?  Priming that cache is an insignificant amount of volume compared to what’s served out of the cache or what one would pay for transit if there wasn’t a cache.  There must be more to this announcement.

I wasn't talking CDNs Brough Turner  –  Apr 27, 2011 8:38 PM

Richard,  Google runs an international network between their sites and to/from many Internet interconnections points. Whether that’s a CDN, an Internet backbone or an access network is irrelevant.  That Google network is interconnected with (at least) hundreds of other networks at thousands of points. I (and many others) refer to those interconnections as peering (either settlement-free or paid). Like you, I remember when “peering” mean only settlement-free arrangements between similar networks but that was more than ten years ago.

Regarding Illiad/Free - many would dispute your assertion of “below-cost access”.  Unfortunately there is no way to resolve this as French reporting is at least as opaque and political as any in the world. Also I have a number of friends in France who love the Free service (and certainly a great many have voted with their wallets).

Peering is a two-way street Richard Bennett  –  Apr 27, 2011 8:50 PM

YouTube runs on Google's CDN, so I think you are talking about CDNs. The difference between the network that Google and other CDNs operate and the ones that say, Tata and Global Crossing operate is very clear from the ISP perspective: The CDNs send traffic to the ISP, but they carry very little traffic for the ISP, and all of that is on-net. They don't qualify for SFP because they're not willing (or able) to do any work for the ISPs. Arguably, CDNs aren't even "on the Internet," they're systems that use a bit of Internet infrastructure without doing the things that full-on networks do on the Internet. Regarding Free.fr, an American MVPD can offer such low prices because the carriage fees and license fees they pay for TV programming are higher than Free.fr's retail price. The people I know who've used their service are unimpressed, but YMMV. I suppose it depends on where they're located relative to the DSLAM. One should not that DSL is DSL wherever one finds it, and there's nothing magic about Free.fr's DSL; AT&T;and Qwest use the same (VDSL+)technology in the US.

Just to confirm Richard's point about costs: Frank Bulk  –  Apr 27, 2011 10:37 PM

Just to confirm Richard's point about costs: yes, our carriage fees alone are almost as high as Free's retail rate. And then we have the cost of the cable plant, people, etc.

MVPDs take all the blame Richard Bennett  –  Apr 27, 2011 10:41 PM

American network policy hacks like to blame the company that has to present the final bill to the consumer for all the upstream costs. If ESPN raises their carriage fees to Comcast, it's Comcast's fault (according to this logic.) Hence billing becomes a game of hot potato. Other than "Engrenages," there's not much on French TV worth watching anyhow.

You miss my point Brough Turner  –  Apr 29, 2011 9:14 PM

It doesn't matter whether you call them a CDN or a backbone network. And it doesn't matter if you dislike my use of the term peering for other than settlement-free interconnect. My point was the free market negotiation of interconnection arrangements has worked extremely well for nearly two decades, through enormous growth and through several major reorganizations of business relationships in the core of the Internet. These voluntary agreements to exchange traffic for mutual benefit have been far more effective than any government orchestrated communications system - certainly more effective than anything that has happened in any telephony regulatory environment anywhere in the world.

Is that really your point? Richard Bennett  –  Apr 29, 2011 9:24 PM

You seem to be saying that regulation of interconnect isn't necessary if there's last mile competition. When there is competition, you're happy to let the parties come to an understanding. You don't say what should happen if there's not competition; your concern about FT's "leverage" suggests that you would be open to regulatory intervention, and your lack of discussion of traffic patterns suggests that FT's desire to pass some costs to the CDNs is illegitimate. So how many last mile providers must there be for the "competition flag" to have a TRUE value? Some people want 100s, others see competition with 2; some what some form of structural separation, others want facilities-based competition, etc.

My original points were: 1) the whole Brough Turner  –  Apr 30, 2011 12:37 PM

My original points were: 1) the whole area is fraught with misunderstandings (evidently beginning with terminology!); 2) today's unregulated interconnection arrangements are working better than any other scheme that's been tried; and 3) if there is a place for regulation, it would be in restraint of those who are leveraging government granted monopolies (perhaps FT but I don't have specifics to argue that one way or the other).

You're not illuminating the debate Richard Bennett  –  Apr 30, 2011 5:25 PM

I don't think there's any great misunderstanding about terminology. It's generally understood that network interconnection more or less breaks down into three modes: SFP, Paid Peering, and Transit. Historically, Internet interconnection has been unregulated, and in that respect is very different from telecom interconnect. There are two current controversies regarding interconnect: 1) Net neutrality: Some people want to permanently bar ISP networks from selling interconnect at different QoS levels. Others want to encourage ISPs to open up access to the QoS tiers they use internally for triple play in order to enhance competition for real-time TV, VoIP, and telepresence. 2) CDN interconnect: Traditional SFP is a bi-directional exchange of roughly equal traffic volumes for mutual benefit. CDN-based video streaming services want free interconnect with ISP networks in order to shift costs of a 20-100 times increase in downstream traffic to ISPs. ISPs aren't willing to take on the increased volume without compensation. You've claimed on CircleID previously that 1) is impossible, but some ISPs do offer this service today; AT&T;offers it, as do some European ISPs. It's especially valuable on mobile networks where voice and data run on differnt QoS tiers. In this piece, you seem to offer a one-sided view of 2) that doesn't do the controversy much justice, and in fact probably adds to the misunderstanding. There aren't any government-granted monopolies for broadband in the US, whether stationary or mobile, for example.

Correction Richard Bennett  –  Apr 27, 2011 8:51 PM

...an American MVPD CAN’T offer such low prices…

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