RE: The large ISPs and Peering

["Jeb R. Linton" <jeblinton () corp earthlink net>]

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
reasons.

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
peer.

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 [mailto:dan () netrail net]
> Sent: Wednesday, July 25, 2001 12:38 PM
> To: jeblinton () corp earthlink net; 'Peering Resistance';
> nanog () merit edu
> 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
> competitive.
> 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
> case.
>
> 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: owner-nanog () merit edu
> [mailto:owner-nanog () merit edu]On Behalf Of
> > Jeb R. Linton
> > Sent: Wednesday, July 25, 2001 11:02 AM
> > To: 'Peering Resistance'; nanog () merit edu
> > 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: owner-nanog () merit edu
> [mailto:owner-nanog () merit edu]On Behalf Of
> > > Peering Resistance
> > > Sent: Tuesday, July 24, 2001 10:50 PM
> > > To: nanog () merit edu
> > > 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
> > >
> > > __________________________________________________
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