Internet Service Providers: Peering and Charging

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1 Internet Service Providers: Peering and Charging UZH HS14 Seminar Internet Economics Markus Cadonau, Sofia Orlova

2 Overview ISP Relationships Internet Hierarchy Peering: Potential and Process Challenges in Networking Economic Interaction between ISPs Economic Interaction between ISPs and UTPs Discussion

3 ISP Relationships Transit Peering ISP AS $ BGP: All routes reachable ISP BGP: A BGP: C, B ISP ISP CP AS: Autonomous System ISP: Internet Service Provider CP: Content Provider BGP: Border Gateway Protocol A C B

4 Internet Hierarchy First Then Why? How? T: Tier CP: Content Provider CP

5 Peering Cons Pros Traffic/Investment Asymmetry Lower Transit Costs Lost potential for transit sales More revenue from usage-based traffic billing of customers Consuming resources Helping competitor Traditionally no SLAs Lower Latency

6 Peering Process Art, not Science 1. Identification of Potential Peer 2. Contact and Qualification 3. Implementation Discussions

7 Network Topology AT&T Sprint Source: Spring et al. (2004). Measuring ISP topologies with rocketfuel.

8 Interconnection Methods Direct-Circuit Small number of regional interconnects Exchange-Based Many peers in region High bandwidth expectations for region

9 Internet Hierarchy Then Now CP

10 Internet Hierarchy Then Now CP CDN CP CP CP CP T: Tier CP: Content Provider CDN: Content Delivery Network

11 Internet Hierarchy Now Future? ISP CP CDN Cache CP CP ISP Cache Cache CP T: Tier CP: Content Provider CDN: Content Delivery Network ISP

12 Issues/Challenges Hot-Potato Routing SLAs Bottlenecks/Congestion QoS, QoE Asymmetry SLAs Paid Peering

13 Business Relationships Peering is a non-transitive relationship

14 Business Relationships II Transit $$$ ISP A Upstream Transit Provider(s) ISP A purchases transit from a UTP The UTP sells Transit Services by announcing reachability to the entire Internet

15 Business Relationships III Non-transitive relations Transitive relations A lot of possibilities for economic interactions between the local ISPs, the Tier 2 and Tier 1

16 Local ISPs Two ways of co-existing with each other: 1) A small number of ISPs who are interested in short term profits or a large number interested in long term profits. 2) Some ISPs could be interested in larger customer shares by setting the prices below others. This would lead to price wars.

17 Local ISPs II Today we have: Small number of local data carriers and a few Tier 2 webhosts corresponding to the first case. A lot of providers in the VoIP market, all interested in quick gains, which leads to price wars.

18 Local ISPs III Simplified peering agreements only reasonable for ISPs of similar size A private exchange point is also possible but the costs would depend on traffic exchange Is a bilateral agreement instead of peering possible?

19 Local ISPs IV What will happen in a one step game? And what will happen in a repeated game? Bilateral agreement possible!

20 Local and Transit ISPs Let s imagine a small model with: Demand functions for websites and end-users Costs for ISPs are very similar, so we ignore them Profit function if customers are charged based on usage are very similar to the ones if customers are charged a flat rate

21 Local and Transit ISPs II At first no incentive to cooperate For the cooperative profit function we have as the demand function There exists a maximum! Can we enforce it? Yes we can!

22 Local and Transit ISPs III Each player could set the prices equal to their costs and gain all the customers Its gives zero profit but it can be played as a threat strategy!

23 Discussion In which cases would you peer as ISP? Peering driven from content providers and CDNs. Source: Krogfoss et al. (2012). Internet architecture evolution and the complex economies of content peering.

24 Discussion Case Study: Netflix Comcast Estimated Congestion on Comcast Links Source: Clark et al. (2014). Measurement and Analysis of Internet Interconnection and Congestion.

25 Discussion Case Study: Netflix Comcast Estimated Congestion on Comcast Links Source: Clark et al. (2014). Measurement and Analysis of Internet Interconnection and Congestion.

26 Discussion Should there be regulations? If so, what kind?

27 Discussion Should there be regulations? If so, what kind? Increased transparency. The connection between consumers and ISPs the so-called last mile is not the only place some sites might get special treatment. So, I am also asking the FCC to make full use of the transparency authorities the court recently upheld, and if necessary to apply net neutrality rules to points of interconnection between the ISP and the rest of the Internet. President Obama on whitehouse.gov/net-neutrality

Traffic delivery evolution in the Internet ENOG 4 Moscow 23 rd October 2012

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