TPRC 2024: The 52nd Research Conference on Communications, Information and Inter

Link to Paper

Abstract:
It is no longer clear who should pay whom and how much for interconnection between Internet Service Providers (ISPs) and content providers. Large ISPs claim that large content providers are imposing a cost on ISPs by sending large amounts of traffic to their customers. ISPs claim that it is more fair that content providers pay for this cost than consumers, because then this cost will be paid only by those consumers with high usage. In contrast, large content providers (including content delivery networks (CDNs)) claim that when they interconnect with ISPs at interconnection points (IXPs) close to consumers, they are already covering the costs of carrying traffic through the core network, and that consumers are already covering the costs of carrying traffic through the ISP's access network. These disputes between large ISPs and large content providers have recurred often during the last 10 years. When not resolved, large ISPs have often refused to increase capacity at interconnection points with large content providers and transit providers, resulting in sustained congestion which has degraded users' quality of experience.

In this paper, we examine internet interconnection policies to analyze the effects of paid peering arrangements between ISPs and content providers/transit providers using the two-sided market model. Our key findings indicate that paid peering is unlikely to result in lower consumer broadband prices. Our results also show that if a content provider or transit provider provides sufficient localization of exchanged traffic, an ISP incurs the same cost as it does when it agrees to settlement-free peering with another ISP. Our research also shows that the public interest is best served by peering prices that are lower than those likely charged by large ISPs.

Our analysis shows that settlement-free peering is warranted if a content provider or transit provider provides sufficient localization of exchanged traffic. Traffic is sufficiently localized if: (1) they interconnect at a reasonable number of interconnection points, (2) the locations of these interconnection points span the country, and (3) the proportion of traffic that is exchanged at an interconnection point that is relatively close to the end user is sufficiently high. In particular, our analysis shows that in the case of peering between an ISP and a content provider, settlement-free peering is warranted when they interconnect at a minimum of 6 interconnection points and localize at least 50% of the traffic.

Therefore, we argue that the Federal Communications Commission (FCC) should require ISPs to offer settlement-free peering arrangements to content and transit providers that agree to reasonably localize their exchanged traffic in this manner. We propose this policy recommendation as a means to serve the public interest by facilitating lower effective prices for internet data transport than market-negotiated paid peering fees. We also propose that the Commission should continue to monitor Internet traffic exchange arrangements under sections 201 and 202. In addition, however, it is now time for the Commission to determine that certain types of Internet traffic exchange arrangements are unreasonable or unreasonably discriminatory practices and would violate sections 201 or 202.