Peering Agreement Definition: An Essential Guide for Network Infrastructure

Peering agreements are a crucial part of the modern internet infrastructure, allowing networks to exchange traffic without the need for an intermediate transit provider. By connecting directly to one another, networks can reduce latency, increase performance, and reduce costs.

So, what exactly is a peering agreement? In simple terms, it`s a contractual agreement between two networks that enables the sharing of traffic. In such an agreement, two networks agree to exchange traffic destined for each other`s network, without charging each other for the transit of that traffic.

Peering agreements can be bilateral or multilateral, depending on the number of networks involved. In a bilateral agreement, two networks agree to exchange traffic directly. In a multilateral agreement, three or more networks agree to exchange traffic among one another.

There are several types of peering agreements, each with its own benefits and drawbacks. The most common types of peering agreements are settlement-free peering and paid peering.

Settlement-free peering is the most common type of peering agreement. In such an agreement, neither network pays the other for the exchange of traffic. Instead, each network provides access to its network infrastructure in exchange for the same from the other network. This type of peering agreement is usually conducted between networks of roughly equal size and traffic volume.

Paid peering, also known as transit peering, is a type of peering agreement where one network pays the other for the transit of its traffic. This type of peering agreement is usually conducted between networks of unequal size, where one network has much higher traffic volume than the other.

Peering agreements can be public or private, depending on the arrangement between the networks involved. Public peering agreements are usually conducted at internet exchange points (IXPs), where multiple networks connect their infrastructure. Private peering agreements, on the other hand, are conducted between two networks that wish to connect their infrastructure directly.

In conclusion, peering agreements play a critical role in the internet infrastructure, enabling networks to exchange traffic directly, reduce latency, increase performance, and reduce costs. By understanding the different types of peering agreements, network operators can choose the right peering strategy for their business needs.