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Summary

In January 2016 Level 3 Communications (Level 3) and Google announced an agreement to exchange traffic between their networks on a settlement-free bit-mile basis. Ovum believes this type of peering arrangement can improve the quality of service by reducing delays and improving reliability. This is particularly important for traffic from OTT content providers and other new media customers dependent on the timely delivery of large volumes of content.

Bit-mile peering addresses network traffic load balancing

For several years, Level 3 has negotiated interconnection agreements based on bit-mile measures, in which two backbone providers agree to exchange traffic measured through a combination of volume and distance between the points of origination/destination and interconnection. In December 2012, TW Telecom (which was subsequently acquired by Level 3) signed a long-term bit-mile interconnection agreement with Level 3. XO Communications did the same in January 2013.

Ovum endorses the bit-mile approach to peering because it encourages the deployment and use of interconnection points in locations that shorten traffic routes, thereby reducing transit delays and improving reliability for customers. The bit-mile approach also improves carriers’ load-balancing capability. We believe that other tier-1 and tier-2 carriers, other communications service providers (CSPs), and large OTTs should switch to using bit-mile peering for the efficient exchange of their growing volumes of Internet traffic.

The January 2016 contract between Level 3 and Google follows their September 2015 deal to give Google Cloud Platform customers access to Level 3’s content delivery network (CDN) services through CDN Interconnect, part of the Google Cloud Interconnect family of products. This Google product offers its customers the ability to use Level 3's CDN to distribute cloud-based content as close as possible to end users, which improves end-user experience by increasing speed and quality of delivery. With the bit-mile peering arrangement, Google and Level 3 will be better able to manage their traffic and the costs incurred to deliver it.

For Level 3 and Google – both of which have growing access infrastructure – the deal extends the benefits of bit-mile peering into the last mile. However, we believe access providers and CSPs with smaller reach will have a more difficult time negotiating these types of contracts because of the asymmetry of traffic exchanged, measured in bit-miles.

Appendix

Further reading

OTT Media Companies: An Important Opportunity for Wholesale Carries, TE0012-000565 (January 2016)

“Level 3 is moving beyond the TW Telecom integration and becoming ‘one’ global carrier, TE0005-000728 (July 2015)

Google: Network and Technology Profile, TE0006-001064 (May 2015)

“Level 3 to acquire TW Telecom,” TE0012-000508 (June 2014)

IP Peering and Transit: Critically Important Wholesale Relationships, TE012-000463 (June 2013)

Authors

David James, Practice Leader, Wholesale Telecoms

david.james@ovum.com

H. Paris Burstyn, Senior Analyst, Wholesale Telecoms

paris.burstyn@ovum.com

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