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Re: cogent+ Level(3) are ok now

  • From: Richard A Steenbergen
  • Date: Tue Nov 01 18:13:58 2005

On Tue, Nov 01, 2005 at 11:16:58AM -0500, vijay gill wrote:
> 
> Pete Templin wrote:
> >
> >
> >John Curran wrote:
> >
> >>Cold-potato only addresses the long-haul; there's still cost on the
> >>receiving network even if its handed off at the closest interconnect
> >>to the final destination(s).
> >
> >And there's still revenue, as the traffic is going to customers (we all 
> >filter our prefixes carefully, right?).  What's the problem with 
> >cold-potato again, or should we all just try to double-dip?
> >
> >pt
> 
> ah yes, double dipping. On-net traffic should be charged a lot less, 
> because after all, it is double dipping.

I can almost smell your sarcasm from here. :)

The problem here is that people naively assume all traffic is the same, 
and costs the same to deliver, which is just not the case. On-net traffic 
costs significantly more to deliver than outbound traffic, because you are 
virtually guaranteed that you are going to have to haul it somewhere at 
your expense. People expect their sub $10/Mbps transit pricing for all 
services across the board now, without understanding that those rates are 
ONLY sustainable because of negligible longhaul costs for the outbound 
traffic. On-net traffic is not "double dipping", it is the ony way that 
transit can be sold for a particular price.

So does that mean that anyone with outbound heavy traffic is automatically 
taking advantage of a peer? Of course not, because while some types of 
traffic may indeed cost more to deliver, that traffic is usually *gasp* 
billed at a higher rate too. Other than spot markets like Cogent trying to 
prop up its ratios or a small tier 2/3 taking advantage of a 95th 
percentile billing trick to give away "free" inbound, I would challange 
folks to find ordinary markets where inbound traffic is not priced 
substantially higher than outbound, especially in areas outside of the 
"big tier 1 bandwidth cities". Numbers close to $100/Mbps (or higher) are 
still perfectly common on OC3's, even on cities which are on major 
longhaul fiber routes.

Remember that content can be moved in order to reduce the cost, eyeballs 
can not. CDN's deliver bits to the right areas to bypass transport costs, 
and even ordinary folks choose where to install their servers in order to 
maximize quality and lower price. Content people who buy transit routinely 
put their servers at or near major ix facilities in order to get a lower 
price for the traffic ("hey look my content goes in and out the same pop, 
or even the same router"). Yes there is an associated cost to deliver 
access traffic to far-flung regions, but your customers are paying you a 
higher rate to do it too.

So, what is inherently wrong with content customers paying $10/Mbps for a 
service which is substantially cheaper to provide, and the access 
customers paying $70/Mbps for the same thing? A lot of people seem to be 
taking the position of silent resentment towards the folks who are selling 
content heavy bandwidth at what can only be described as competetive 
market pricing (meaning, you can buy it at that price from almost anyone). 
They see such a large volume of traffic and think:

a) crap, our network design can't possibly deliver that many bits at those 
prices in order to compete with them.

and

b) but man if we were billing all that at $70/Mbps we could, and we would 
be if not for that damn content-heavy network who is getting "free 
peering" in to our network in order to sell it for so cheap. We're paying 
more of the cost for that traffic than they are too, clearly we need to 
depeer them.

Unfortunately they often do so without understanding the symbiotic 
relationship between the two kinds of traffic, and the two types of 
networks. If you look at a network like Cogent, it is designed from the 
ground up to be efficient and cheap at delivering bulk bits from a few 
customers at a few key points to the rest of the Internet, which is how 
Cogent is able to erm lose as little money as they do. Their network 
design looks almost nothing like a network who is optimized to deliver 
access circuits to a large number of smaller customers across a large 
number of locations, and it would be far less efficient at it if called 
upon to do so.

In this case, jealousy is blinding a lot of people to the fact that there 
is room for networks who specialize in content to co-exist with networks 
who specialize in access, and for them both to add value to each other 
through interconnection. Specializing in a specific area leads to 
optimized network designs and reduced costs, and networks who don't may 
find that they aren't very good (or at least, cost competetive) at either. 
This naturally leads into two camps:

1) Networks who are more efficient, who end up paying a lot less, and who 
end up moving a very large amount of bits because of it (but at a much 
lower price/meg).

2) Networks who are less efficient, who pay a lot more, and who therefore 
have to charge their customers a lot more in order to survive. These 
networks face constant attrition from more competetive providers, and 
quickly realize that access to their single homed customers is one of 
their only bargining chips left to make people pay a higher price.

Yes these are financially trying times for everyone, content and access 
networks alike. Everyone wants to "take action" to generate additional 
revenue, or to strike out at networks who are perceived as offering prices 
which are "too low" based on "dumping" of push heavy traffic and "unfair" 
cost burdons. Unfortunately in the rush to do that, many networks are 
actually creating exactly the situation they want to avoid. How much 
business do you think has been lost to Cogent giving away free or 
super-low-cost inbound in order to prop up its ratios? How much revenue 
has been generated by depeering Cogent because of ratio imbalances? The 
numbers speak for themselves, regardless of who does or doesn't pay a 
higher amount to deliver the traffic.

-- 
Richard A Steenbergen <ras@e-gerbil.net>       http://www.e-gerbil.net/ras
GPG Key ID: 0xF8B12CBC (7535 7F59 8204 ED1F CC1C 53AF 4C41 5ECA F8B1 2CBC)




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