Ecommerce has grown exponentially over the past decade and shows no signs of stopping. Additionally, almost all businesses now have an online presence, as most customers are also online. As internet access and adoption continue to grow, it follows that network architectures are bound to be more distributed and complex.
This is where internet exchanges (IX) and network peering come into play. They provide key connection points that facilitate efficient data transfer. Given the trajectory of internet adoption and usage nowadays, both technologies should be a priority for businesses looking to improve their networks.
In this blog, we’ll delve into how network peering and internet exchanges work — and how businesses can benefit from using them.
What is Internet Peering and how does it work?
Internet peering, also known as network peering and IX peering, is a cost-efficient solution that internet service providers use for seamless data exchanges. Internet peering serves as an important foundation for data and the way it is managed, transferred, stored, and processed among internet service providers (ISPs).
IX peering is used not only by ISPs but also used by network carriers, data centers, content providers, enterprises and infrastructure companies to enhance network performance, reach and efficiency.
IX peering or network peering works by establishing a connection between two networks, allowing users to exchange data directly. This eliminates the need for a third party for routing traffic over the internet. The result is a much faster user-to-user connection. The process of peering is different from that of transit, a more common practice — where an end user or network operator would pay another operator to carry their traffic.
ISPs and other network operators rely on peering relationships so that they don’t have to rely heavily on transit providers, which can be costly. Peering also allows them to improve service quality for the sake of their customers. By forming peering agreements with other networks, ISPs and operators can safely and directly exchange traffic with their peers, reducing latency and improving network performance.
There are different forms of network peering, such as physical peering and virtual peering. Physical peering is when two networks connect their routers at a common location, while virtual peering allows two networks to connect their routers over the internet. Network peering usually takes place at Internet Exchange Points (IXPs), where several networks interconnect to exchange traffic.
The two main types of peering are public and private:
- Public Peering: This involves connecting through a communal network or IXP, allowing networks to establish connections with multiple peers through one or many physical links. This allows networks to optimize the cost per peer when transmitting data to several networks. IXPs often impose fees to sustain their infrastructure and keep it well-maintained.
- Private Peering: This type of peering occurs within a facility where two entities interconnect through a cross-connect instead of an exchange point switch. This is typically used when networks need to exchange a large amount of data that a shared connection at an IXP cannot handle.
How do Internet Exchange Points (IXPs) Work?
Internet Exchange Points (IXPs) allow different networks and ISPs to exchange internet traffic without a hitch. They are physical locations that serve as central points where internet infrastructure companies interconnect their networks, enabling efficient and cost-effective data exchange.
In essence, IXPs enable internet service providers to exchange traffic directly, eliminating the need for multiple ISPs or international links. This kind of direct exchange significantly reduces network latency and enhances overall performance.
By connecting to an IXP, ISPs gain access to a diverse array of networks, promoting optimal routing and improving user experience. IXPs also play an important role in building network resilience, enhancing local and regional internet connectivity, and supporting digital ecosystem growth through large data exchanges carried out rapidly.
Why is Network Peering Important?
Enterprises require private connectivity to access essential services that enhance their capacity to serve end users. This is particularly necessary for many of the cloud-based productivity and collaboration tools that have already become crucial to many a business operation. While peering may not seem like the most advanced method for achieving that connectivity, it remains vital. Let’s explore why.
The first reason is security. Many enterprise customers prefer private peering with hyperscalers and SaaS providers to ensure security. This is especially vital nowadays when high-profile cybersecurity attacks are becoming alarmingly frequent and more sophisticated. As such, it’s understandable for enterprises to avoid exposing their traffic to the risks associated with the public internet.
However, many hyperscalers have become hesitant to engage in private peering arrangements in an effort to make their services more accessible to a wider range of customers while also maintaining consistent quality and bandwidth. When direct peering with hyperscalers is not doable, enterprise customers can still attain similar security and reliability advantages by opting for private peering with their partner NSPs and ISPs.
Banks and large financial institutions, for instance, often depend on complex interconnections with numerous financial and IT service providers, including essential data feeds from firms like Reuters and Bloomberg. Peering in a colocated data center offers a strategic advantage by providing access to these services in a manner that is both cost-effective and time-sensitive. Through peering, banks can obtain swift and reliable access to the critical financial data they require, enabling them to make rapid decisions based on the most current information.
In addition, private peering can also provide enterprises with better network performance and reduced latency. By directly connecting to their partner NSPs and ISPs, enterprises can bypass the congested public internet and achieve faster data transmission speeds. This is especially crucial for businesses that rely on real-time data processing or require low latency for applications such as video conferencing, online gaming, and high-frequency trading.
Moreover, private peering allows for more control over traffic routing and prioritization. With a direct connection to their partner NSPs and ISPs, enterprises can choose the most efficient routes for their traffic to ensure optimal performance. They can also prioritize certain types of traffic, such as critical business applications or voice services, to ensure they receive the necessary bandwidth.
The Difference Between IP Transit Vs. Network Peering
IP peering and IP transit are terms used by ISPs to describe the connections that constitute the internet and their associated hierarchies.
IP peering refers to a mutual exchange of data between two ISPs, where the volume of data exchanged is typically balanced. Since both parties benefit equally from this exchange, the arrangement is settlement-free, meaning that neither ISP incurs charges from the other.
On the other hand, IP transit occurs when one entity pays another for the right to utilize its upstream network. In this scenario, one entity holds a higher position in the hierarchy than the other, eliminating the peering relationship, as the benefits of the exchange are not equal.
From an enterprise perspective, IP transit happens when a business connects to an ISP to access the internet. It is important to distinguish this from BGP peering, which is a network-level definition rather than an ISP-specific one. Moreover, peering arrangements typically apply only to a participant’s prefixes and their directly connected peers.
Benefits of Network Peering
Network peering creates a dynamic ecosystem of platforms and services, facilitating mutual connections that enhance IP architectures while reducing latency for end-user traffic. By engaging in peering arrangements, organizations can increase revenue from their services, benefiting from several advantages:
- Scalability
- Simplified operations
- Enhanced network performance
- Broader reach
- Community leveraging
- Cost reduction
Of course, one of the primary benefits of peering is the reduction in latency it provides, which we’ve established earlier. Unlike traditional routing methods that involve multiple intermediary networks, peering allows for direct data exchange between connected networks.
This approach minimizes the number of hops that data packets need to traverse, resulting in significantly reduced latency and improved network performance. With less reliance on transit networks, data transit becomes faster and more seamless, ultimately delivering a better experience for end users.
Moreover, this streamlined routing design eliminates dependence on intermediate networks and providers that may struggle with troubleshooting. By routing through an internet exchange, data traveling within a specific locality or region can be delivered directly to its destination without unnecessary detours, creating a much more efficient setup.
Contact us
To take a close look at your network traffic, and see where you can optimize your strategy to reduce latency and cost, schedule a call with a network engineer at NetActuate. Our team operates and optimizes one of the largest global networks in the world by number of peers. We can help you leverage peering, direct connections, and more, to help make your network faster, more efficient, and more reliable.
You can also leverage our remote peering partnerships with the Amsterdam Internet Exchange (AMS-IX) or the New York Internet Exchange (NYIIX).