Peering Math 101

Question

DrPeering - 


What is the cost of peering from Bucharest into Frankfurt? Does it make sense financially to peer?


Dr. Heywood R. Floyd

Clavius Base, TMA-1 Project

Answer

Dr. Floyd -


For this, let’s apply the Business Case for Peering:


Assume*:


Transport: 10Gbps circuit from Bucharest to Frankfurt cost ~ 2000 Euros/mo.

Colocation Space: 800 Euros/mo

Cross Connect in colo: 200 Euros/mo.

10G Peering Port: 2300 Euros/mo.

Router (amortized over 2-3 years): 2000 Euros/mo.

=======================================

Total monthly cost of Peering: 7300 Euros/mo


*These numbers gleaned from discussions with my European friends.


Total Effective Peering Bandwidth: 7000 Mbps (out of a 10Gbps transport)


Calculations and Analysis

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First let’s calculate the best case scenario: What is the minimum cost for peering traffic?


Minimum Cost of Traffic Exchange: 7300Euros/mo/7000Mbps = 1,04 Euros/Mbps


That is, this is the best you can hope for. You completely fill the peering pipe with 7000Mbps, spiking higher of course but hopefully not hitting the ceiling and dropping packets, and the cost for traffic exchange works out to 1,04 Euros/Mbps..


Let’s assume the price of Internet Transit in Romania is 1,50 Euros/Mbps.


The Peering Break-Even Point is 7300 Euros/mo / 1.5 Euros/Mbps = ~ 4.8 Gbps 


That is, if you can peer away over 4.8Gbps of traffic away for free over this peering pipe, then you will save money by peering instead of sending that traffic to your upstream for 1,5 Euros/Mbps. You can scale this up to 7Gbps before you need to upgrade the peering capacity to the IXP.


If the price of Internet Transit is 3 Euros/Mbps as my Romanian friend shared with me, then the peering breakeven point is lower:


The Peering Break-Even Point is 7300 Euros/mo / 3  Euros/Mbps = ~ 2.4  Gbps 


That is, if you can peer away over 2.4 Gbps of traffic away for free over this peering pipe, then you will save money by peering instead of sending that traffic to your upstream for 3 Euros/Mbps. You can scale this up to 7Gbps before you need to upgrade the peering capacity to the IXP.


At this price point for Internet Transit in Romania, one can understand the attraction of peering in Frankfurt. As more Romanian ISPs do this, the price for Internet Transit in Romania will of course drop, demonstrating that the price of Internet Transit is is lower as one gets closer to network dense IXPs.


You might be saying, “I don’t believe we can peer away that many Gbps of r traffic to the peering community at the IXP.” For you, take a look at tethering (aka remote peering) as a way to reduce the monthly cost of peering and therefore lower the Peering Break-Even Point:


The Peering Break-Even Point is 4500 Euros/mo / 3  Euros/Mbps = ~1.5  Gbps 


using tethering to the DE-CIX. When enough traffic is peered at the IXP it may make sense to transition to a physical presence. In some cases networks also buy transit across the tethered or physical presence at the IXP to further utilize the transport in.


I hope this helps -

Summary