RE: The large ISPs and Peering

[Curtis Maurand <curtis () lamere net>]

On Wed, 25 Jul 2001, Jeb R. Linton wrote:

> 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.

A rose by any other name...  The fact is, and history shows us, that when
cartels form, things get bad for the consumer.  Oil, Electricity,
telecomm.  However, The placement of the NAP's is disconcerting, because
the process for choosing them was closed.   Does it make sense for all of
my traffic going to maine.rr.com from lamere.net (both in Maine and in the
same communities) to exchange traffic at MAE east 650 miles away?

> 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 6glut.

There won't be if the Tier-1's all form a "consotium."  They will collude
on network build out and stop competing with each other.  If you think
that's not true, think again.

> 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.

 Competition is great.  If the "consortium" is formmed it will wipe out
all
those strides in bringing loop and bandwidth charges down to a more
reasonable level.  Competition brought us the glut and lower prices.  A
consortium will wipe out the glut and raise prices.

> 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.

See my answer to point 1.

> 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.
>

Yes, but the equalization will happen at the higher price.  There's nobody
to compete with, so why keep the price down?  Then the
question is, which provider you go with.  Hopefully the one that beats
everyone else up on customer service since that will be the only thing
that sets you apart from the other cartel members.  But since none of the
providers have really good customer service, then you all begin to look
the same and we little guys start looking for alternatives.

> 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.

The consortium will control supply at a lower level.  Prices will
increase.


Curtis

> > -----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
> > > >
> > > > __________________________________________________
> > > > Do You Yahoo!?
> > > > Make international calls for as low as $.04/minute with
> > > > Yahoo! Messenger
> > > > http://phonecard.yahoo.com/

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