, Volume 6, Issue 1, pp 43–57 | Cite as

Internet Interconnection Economic Model and its Analysis: Peering and Settlement

  • Martin B. Weiss
  • Seung Jae Shin


Peering and transit are two types of Internet interconnection among ISPs. Peering has been a core concept to sustain Internet industry. However, for the past several years, many ISPs broke their peering arrangement because of asymmetric traffic pattern and asymmetric benefit and cost from the peering. Even though traffic flows are not a good indicator of the relative benefit of an Internet interconnection between the ISPs, it is needless to say that cost is a function of traffic and the only thing that we can know for certain is inbound/outbound traffic volumes between the ISPs. In this context, we suggest Max{inbound traffic volume, outbound traffic volume} as an alternative criterion to determine the Internet settlement between ISPs and we demonstrate this rule makes ISPs easier to make a peering arrangement. In our model, the traffic volume is a function of a market share. We will show the market share decides traffic volume, which is based on the settlement between ISPs. As a result, we address the current interconnection settlement problem with knowledge of inbound and outbound traffic flows and we develop an analytical framework to explain the Internet interconnection settlement.

Internet interconnection peering settlement transit 


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Copyright information

© Kluwer Academic Publishers 2004

Authors and Affiliations

  • Martin B. Weiss
    • 1
  • Seung Jae Shin
    • 2
  1. 1.Department of Information Science and Telecommunication, School of Information ScienceUniversity of PittsburghPittsburghUSA
  2. 2.Department of Management and Information Systems, College of Business and IndustryMississippi State UniversityMeridianUSA

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