Subject: [Speermint] Background Reading on NGN Interconnect - transit vs peering

From: "Pfautz, Penn L, NEO" <[email-masked]>
Date: Wed, 5 Apr 2006 11:12:19 -0400

Richard:
Thanks for posting this. I recommend it to all. In particular we ought
to pay attention to the definition of peering versus transit offered by
the US FCC and cited in the Marcus paper:
 
	Peering is an agreement between ISPs to carry traffic for each
other and for their respective
	customers. Peering does not include the obligation to carry
traffic to third parties. Peering is usually a
	bilateral business and technical arrangement, where two
providers agree to accept traffic from one
	another, and from one another's customers (and thus from their
customers' customers). ...

	Transit is an agreement where an ISP agrees to carry traffic on
behalf of another ISP or end user. In
	most cases transit will include an obligation to carry traffic
to third parties. Transit is usually a
	bilateral business and technical arrangement, where one provider
(the transit provider) agrees to carry
	traffic to third parties on behalf of another provider or an end
user (the customer). In most cases, the
	transit provider carries traffic to and from its other
customers, and to and from every destination on
	the Internet, as part of the transit arrangement. In a transit
agreement, the ISP often also provides
	ancillary services, such as Service Level Agreements,
installation support, local telecom provisioning,
	and Network Operations Center (NOC) support.

While we NEED not accept this definition I think it does reflect the
reality of layer 3 peering and it will not be helpful to use a
definition for layer 5 that is at odds with layer 3 since that's what
people are familiar with.
If the will of the WG is to include transit in our charter that's fine -
but not an excuse for calling apples and oranges both apples. If, at the
end of the day, there are no important differences in how we treat the
two cases - which I doubt - then life is good.

We also ought to be thinking about how what Speermint is working on
relates to what's going on in other bodies, e.g. the ITU. (yes, I said
it, we're not alone on the planet :-) Is what we want to do an enabling
piece of what NGN folks are looking toward or is it a fundamentally
different animal? From the discussion on the list and at the IETF I'm
not entirely sure.

-----Original Message-----
From: Stastny Richard [mailto:[email-masked]] 
Sent: Friday, March 31, 2006 3:59 PM
To: [email-masked]
Subject: [Speermint] Background Reading on NGN Interconnect

Folks,
 
Weekend reading
 
Since we obviosly are dealing more with NGN Interconnect in Speermint,
I recommend everybody on this this list to read the excellent Background
Paper
from Scott Marcus - Interconnection in an IP-based NGN Environment
http://www.itu.int/osg/spu/ngn/documents/Papers/Marcus-060323-Fin-v2.1.p
df
 
to his presentation 
http://www.itu.int/osg/spu/ngn/documents/presentations/marcus-23-march-2
006.ppt
given at the ITU-T Workshop last week
What Rules for Ip-eneabled NGNs?
http://www.itu.int/osg/spu/ngn/event-march-2006.phtml
 
The agenda and some other excellent presentations can be downloaded from
here:
http://www.itu.int/osg/spu/ngn/presentations.html
 
In addition I would also like to point to a CEPT ECC Draft Report
on the Future on Numbering, tabled for the next ITU-T SG2 Meeting
as TD 198-GEN. 
https://mail.oefeg.at/exchweb/bin/redir.asp?URL=http://www.ero.dk/271322
2D-C8AF-4407-BE53-131EA2EED278?frames=no%26
The document is in public consultation and not final yet.
It contains also some statements regarding termination rates.
 
The paper from Scott is on-topic regarding the current discussion here
and dealing with both the European and US situation

Scott Marcus is currently living in Europe, but in his former life
he was Senior Advisor to the FCC and also CTO for GTE Interworking,
so his knowledge is not only theoretical.
 
In the document also contains a definition on peering and transit from
the FCC is given:
 
The two most prevalent forms of Internet interconnection are peering and
transit. For a definition of these 
terms, we turn to a publication of the Network Reliability and
Interoperability Council (NRIC), an industry 
advisory panel to the U.S. FCC: 
 
Peering is an agreement between ISPs to carry traffic for each other and
for their respective 
customers. Peering does not include the obligation to carry traffic to
third parties. Peering is usually a 
bilateral business and technical arrangement, where two providers agree
to accept traffic from one 
another, and from one another's customers (and thus from their
customers' customers). ... 
 
Transit is an agreement where an ISP agrees to carry traffic on behalf
of another ISP or end user. In 
most cases transit will include an obligation to carry traffic to third
parties. Transit is usually a 
bilateral business and technical arrangement, where one provider (the
transit provider) agrees to carry 
traffic to third parties on behalf of another provider or an end user
(the customer).  In most cases, the 
transit provider carries traffic to and from its other customers, and to
and from every destination on 
the Internet, as part of the transit arrangement.  In a transit
agreement, the ISP often also provides 
ancillary services, such as Service Level Agreements, installation
support, local telecom provisioning, 
and Network Operations Center (NOC) support. 
 
Peering thus offers a provider access only to a single provider's
customers. Transit, by contrast, 
usually provides access at a predictable price to the entire Internet.
... Historically, peering has often 
been done on a bill-and-keep basis, without cash payments. Peering where
there is no explicit 
exchange of money between parties, and where each party supports part of
the cost of the 
interconnect, ... is typically used where both parties perceive a
roughly equal exchange of value. 
Peering therefore is fundamentally a barter relationship
 
Here the Executive Summary of the paper:
 
This report considers the likely evolution of interconnection
arrangements in the context of IP-based Next 
Generation Networks (NGNs). 

The NGN represents a synthesis of existing world of the "traditional"
Public Switched Telephone Network 
(PSTN) with the world of the Internet. The economic and regulatory
arrangements for the two have 
historically been very different. What should happen when these two
worlds collide? 

Many of the networks created over the past ten years contain most of the
key elements of an NGN. Most, if 
not all, of the technology necessary for IP-based NGN interconnection
has been available for five to ten 
years. Advanced approaches to interconnection have been slow to deploy,
even where the technology has 
been mature or within hailing distance of maturity. 

The NGN interconnection problem is best understood, not as a problem of
technology, but rather as a 
problem in economics. With that in mind, this report seeks to review
what is known about interconnection 
from an economic perspective, in order to reach conclusions about the
prospects for deployment going 
forward and the corresponding implications for policymakers. 

A substantial body of economic theory has been developed over the past
decade as regards interconnection in 
the traditional PSTN. A smaller body of solid economic research has
emerged in regard to interconnection of 
IP-based networks. At the level of economic theory, the PSTN and the
Internet are not worlds apart. 
Economics provides the necessary bridge between the two worlds,
illuminating both the similarities and the 
differences in these two environments. 

This report begins by laying out, for the most part at a non-technical
level, the established theory of 
interconnection, for both the PSTN and the Internet. Wholesale and
retail arrangements are considered 
separately. Most of the observed behavior of these economic networks can
be explained in terms of a 
constellation of known economic effects: market power, the termination
monopoly, demand elasticity, 
network exernalities, transaction costs, service differentiation, price
discrimination, and the Coase theorem 
(which says that private parties can often negotiate arrangements more
efficiently than government 
regulators, provided that necessary preconditions have been met). 
 
With this theory in hand, the report considers the implications for the
deployment of differentiated Quality of 
Service, and of universal service. We also consider the implications of
IP-based technology - with the 
layering, and the changes in industry structure that it implies -
service providers become independent of the 
network, but neither is well equipped to measure or to charge for the
other's resource consumption. 
 The last section of the report represents a hypothetical scenario, a
"thought experiment", where the historic 
wired and mobile incumbent of European country upgrades its networks to
an IP-based NGN. We consider 
the likely results in terms of regulation of the access network, and of
interconnection; likely domestic and 
international interconnection arrangements; and the implications for
ubiquitous support of QoS. Key findings 
include: 
*  Provided that markets for Internet transit and for consumer broadband
Internet access are effectively 
competitive, a "Coasian" interconnection regime is likely to be more
efficient, and more consistent 
with consumer welfare, than a regulated regime. 
*  Conversely, where these markets are not effectively competitive,
mandates for interconnection at the 
IP level may prove to be unavoidable, particularly once existing PSTN
interconnection is withdrawn. 
The migration to NGN potentially creates new sources of market power, at
the same time that it 
creates new possibilities for competition. 
*  Policymakers might consequently be well advised  to focus their
attention first on ensuring 
competitive markets, and only secondarily on interconnection. 

Current Calling Party's Network Pays (CPNP) arrangements contain a
number of implicit subsidies. In the 
world of the NGN, where services providers and networks operators may be
different entities, these 
subsidies need major re-thinking - call termination payments that were
intended to finance the terminating 
network would, by default, flow to independent VoIP service provides who
have no network to support. In 
the absence of termination fees, independent VoIP providers would tend
to compete price levels for 
telephony service, independent of the network, down to levels not
greatly above cost, which would appear to 
be a societally desirable outcome.
 
The thought experiment does not flatly preclude the possibility that
governments might somehow erect a 
new system of subsidies to replace the old, but it suggests that any
subsidy system will be difficult to sustain 
over time in the face of new forms of competition enabled by the
IP-based NGN - all provided, once again, 
that underlying markets (especially for wholesale Internet transit and
for retail Internet broadband access) 
remain effectively competitive. A system of Coasian private
arrangements, in the absence of vertically 
integrated competitive bottlenecks, seems likely to lead to unsubsidized
arrangements at wholesale and retail 
price levels not greatly in excess of cost. 

cheer
Richard

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From: "Bob Natale" <[email-masked]>
Date: Thu, 6 Apr 2006 16:09:31 -0400

Hi Otmar, everyone:

In my presentation in Dallas dealing with the Requirements BCP
milestone, I noted that our charter seems to present the differences
between "interconnection" and "peering" thusly:

"Scope: Interconnection versus Peering?

Interconnection (for SPEERMINT -- from the charter text):
   - Both signaling and media flows must be taken into consideration 
   - Use cases that include the interaction between the application
layer and lower network layers
   - or the dependence of specific application layer use cases on lower
layers 

Peering (for SPEERMINT -- from the charter text):
   - The interconnection between application layer entities such as SIP
servers
   - as opposed to interconnection at the IP network layer"

Assuming the charter text says what it intended to say (which might be
questionable at this point):

- Peering is a form of interconnection with the following
characteristics:
  - is not concerned with use cases below L5
  - is not concerned with media flows
  - is not concerned with L5 dependencies on lower layers

We can (and possibly should) broaden our scope beyond that, but we
should also ensure that the charter text then says what we mean.

Cheers,
BobN

-----Original Message-----
From: Otmar Lendl [mailto:[email-masked]]
Sent: Thursday, April 06, 2006 11:44 AM
To: [email-masked]
Subject: Re: [Speermint] RE: Background Reading on NGN Interconnect -
transitvs peering

On 2006/04/06 17:04, Richard Shockey <[email-masked]> wrote:
> Stastny Richard wrote:
> >The problem I have with the FCC definition is that is states that
> >peering is always bi-lateral
> >
> >The major reason for setting up SPEERMINT was that everybody seems at
> >least to agree that bi-lateral peering does not scale globally.
>
> All peering arrangements among IP backbones are bi-lateral and the
> Internet seems to have scaled reasonably well.

The reason for that is "transit". It is thus not necessary that any
Autonomous Systems peers with all other AS.

I think we should define the difference between "Peering" and
"Interconnection" (which in my mind also allows for transit).

Bi-lateral peering alone will definitly not solve the world-wide
reachability problem.

/ol
--
< Otmar Lendl ([email-masked]) | nic.at Systems Engineer >