Internet Peering & Transit

How Internet Traffic Flows

The internet is not a single network but a network of networks. Traffic flows between these networks through two types of business relationships: peering and transit.

Peering

Peering is a mutual agreement between two networks to exchange traffic directly, typically without payment. Both networks benefit because they can deliver traffic to each other faster and cheaper than routing through a third party.

Settlement-Free Peering

Most common type. Neither network pays the other. Works when both networks send and receive roughly equal amounts of traffic.

Paid Peering

When traffic is imbalanced, the network sending more traffic may pay the other. Common between content providers (like Netflix) and eyeball networks (ISPs with consumers).

Transit

Transit is a paid service where one network (the transit provider) carries traffic to and from the rest of the internet on behalf of another network (the customer).

Think of it as buying internet access for your entire network, not just one device.

Small ISP ──[pays]──→ Transit Provider ──→ Rest of Internet

Tier 1 networks (like Lumen/Level3, NTT, Telia) don't need to buy transit — they peer with all other Tier 1 networks and can reach the entire internet through peering alone.

Internet Exchange Points (IXPs)

An IXP (Internet Exchange Point) is a physical location where multiple networks connect to peer with each other. Instead of establishing private connections with each peer, networks connect to the IXP and can peer with all other connected networks.

Major IXPs:

The Network Hierarchy

          Tier 1 Networks
         (peer with all T1s)
        /         |         \
    Transit    Transit    Transit
      /           |          \
   Tier 2      Tier 2     Tier 2
  Networks    Networks    Networks
    /    \       |         /    \
  Tier 3  T3   T3      Tier 3  T3

Why This Matters

• Latency: Peering reduces the number of network hops, lowering latency
• Cost: Transit is expensive; peering is usually free or cheaper
• Reliability: Multiple peering connections provide redundancy
• Performance: Content delivery networks (CDNs) peer directly with ISPs to serve content faster