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RE: The large ISPs and Peering

  • From: David Diaz
  • Date: Wed Jul 25 14:38:04 2001

From what I understand, the space requirements were 1,000 sq ft. Obviously this would not fill any of the colos they decided to go into. Where the colos were not "super-sized" they were asking about cross connect models where even if the next tier1 went into a different colo, there was a cross connect available at the same pricing as if they were in the room. So it seems they were making it part of the duties of the colo landlords to provide an infrastructure where by no future tier1s would have a cost disadvantage.

What I read into this was that non of the existing tier1s wanted any future company to scream "consortium" or any other dirty words, and say they were placed at a competitive disadvantage because the existing colo was full.

As you can read from Jeb's email, if the tier1s are too tight on peering policy, it only encourages the tier2s and content people to work around them, meaning a reduction of traffic ie. revenue for the tier1s.


At 1:07 PM -0400 7/25/01, Jeb R. Linton wrote:
You're certainly right about the optical gear, but it misses the point that
the Tier-1s will come nowhere near filling these facilities.

Non-Tier-1 players are by no means being excluded from getting into these
facilities - exactly the opposite. The facility vendors are pushing to get
them in. The only thing were weren't included in is the choice of
facilities; if the Tier-1s want to form a consortium (they call it that,
rather than a "cartel"), it's certainly within their rights to do so.

I don't see this as a bad thing. What you say about price equalization
followed by increases may be true, but it seems unlikely to me for a few

1. There's a fiber glut.
2. Several of the Tier-1s in the consortium are relatively new players who
are still paying for their share of the fiber glut, in a market downturn.
3. Because of 1 & 2, transit prices have already plummetted this year. The
best price we can get now is less than 50% what it was eight months ago.
4. Tier-2s and Content Providers have already started peering aggressively
to avoid paying the Tier-1s for transit. This is likely to happen even more
aggressively if we have a smaller and better known set of places to meet and

This is even more compelling to the larger, older, more expensive Tier-1s.
If I'm in a building where three providers can give me transit at $100/Mb
and four have it at $200-300/Mb, the choice is easy. Equalization may happen
here, but it will be a good thing, not a bad thing, for the reasons above.

In the end, Tier-1s need more transit business, and Tier-2s/Content
Providers need less transit (i.e. the growth rate is decreasing). More
supply, less demand. Prices will decrease.

- Jeb

 -----Original Message-----
 From: Daniel Golding []
 Sent: Wednesday, July 25, 2001 12:38 PM
 To:; 'Peering Resistance';
 Subject: RE: The large ISPs and Peering

 Let's break this one down.

 The large ISPs have finally started to work together, to
 potentially exclude
 smaller providers. That isn't good.

 Certain colo facilities are being choosen. Others are not.
 This has a major
 business impact on the ones who aren't choosen.

 Why is any of this bad? Because when X providers who control
 a large part of
 the market start to work together, you get a Cartel. This
 type of joint
 decision-making is always bad for the smaller player in the
 field, as the
 self-interest of the larger players is to preserve their own
 market share.

 Cartels are bad for business, as they make the industry less
 Thats bad for everyone.

 As for your remarks about these providers and their "huge"
 routers, and the
 bigness of these colos... What does that have to do with this
 issue? The
 vast majority of space would be taken up with DWDM or SONET
 > gear in any

 A "one-stop shop" looks good to the consumer, at least at first. What
 happens when the prices start to synchronize? This type of
 approach takes a
 great deal of flexibility out of the IP transit sales
 process. The big will
 get bigger, and the consumer will eventually suffer.

 Earthlink is a huge consumer of transit bandwidth, so it
 would seem to be in
 your shareholder's best interest to keep competition high,
 and thus keep
 prices low.

 - Daniel Golding

 > -----Original Message-----
 > From:
 []On Behalf Of
 > Jeb R. Linton
 > Sent: Wednesday, July 25, 2001 11:02 AM
 > To: 'Peering Resistance';
 > Subject: RE: The large ISPs and Peering
 > >
 > There's nothing sinister or secret about this.
 > I can't say who the winners are because the winners aren't
 > official yet, and
 > I also have heard only rumors. The big players are simply
 doing a smart
 > thing - deciding together on points where they can all
 agree to meet and
 > peer at 2.4Gb and 10Gb cheaply. It's obviously the right
 thing to do.
 > What it means for smaller ISPs, content providers, etc., is that
 > there will
 > now be a particular Equinix, Level(3), etc. facility, where we
 > know all the
 > big players will be. Those facility providers won't keep us
 out - they'll
 > market the fact that the top Tier-1's are there in order to
 get everyone
 > else there too.
 > These facilities are huge. Each Tier-1 needs space for a few
 > Juniper M160s,
 > Cisco 12400s, etc. The space left is more than enough for
 Tier-2s and
 > content providers galore. There's nothing preventing the
 big guys from
 > competing to provide transit to others in those facilities
 without huge
 > local loop costs. It's basically a one-stop shop for
 transit circuits from
 > anybody you want - they know this, so the competition will
 be pretty good.
 > "What happens to my favorite Co-lo?"... Well, if you're not in
 > the facility
 > that gets chosen, it's still likely there will be cheap
 connections from
 > yours to theirs. These thing will sit on multiple metro
 fiber rings, so
 > again there will be decent competition. Any old facility
 that doesn't hook
 > up to the chosen ones knows they will be left out in the
 dark. So choose
 > wisely.
 > - Jeb Linton
 > (My opinions only, not the opinions of EarthLink or anyone else
 > as far as I
 > know.)
 > > -----Original Message-----
 > > From:
 []On Behalf Of
 > > Peering Resistance
 > > Sent: Tuesday, July 24, 2001 10:50 PM
 > > To:
 > > Subject: The large ISPs and Peering
 > >
 > >
 > >
 > > This is an interesting tale, and one that everyone
 > > involved with the ISP world should know about.
 > >
 > > Aproximately 8 months ago, several of the very largest
 > > ISPs, ones with names like WorldCom, Sprint, CW,
 > > Genuity, and others, came together to discuss the
 > > concept of peering. The all peered with each other,
 > > most with very large peering circuits - OC-12 or
 > > above. The problem was that the provisioning time and
 > > effort required for these circuits was getting quite
 > > out of control. Costs of interconnects were also high.
 > >
 > >
 > > So, these large providers did the "unthinkable". They
 > > decided to issue an RFP to 8 sites around the US,
 > > which they would jointly inhabit for purposes of
 > > peering. In order to avoid the appearence of
 > > collusion, they all issued similar RFPs, each
 > > originating from their own company, but otherwise
 > > almost identical. And the sites were choosen using
 > > essentially identical criteria. So, unsurprisingly,
 > > the same 8 sites were choosen, in such cities as
 > > Dallas, Chicago, San Francisco, New York, DC, and
 > > others.
 > >
 > > There are several rumors floating about as to which
 > > sites were choosen. This is unconfirmed and
 > > conjecture, so I won't go into it for this email.
 > > >
 > > The key questions...
 > >
 > > 1) What are the selected sites?
 > > 2) How do the rest of us play?
 > > 3) Why wasn't this process more open?
 > >
 > > I know that this is a true situation, as I have
 > > confirmation from three different sources, and have
 > > seen copies of several of the RFCs. I eagerly await
 > > the comments of those providers involved with this
 > > effort, and hope that this will lead to a more open
 > > internet.
 > >
 > > - PR
 > >
 > > __________________________________________________
 > > Do You Yahoo!?
 > > Make international calls for as low as $.04/minute with
 > > Yahoo! Messenger
 > >
 > >

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