Why IP Peering matters to cloud service providers

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Why IP Peering matters to cloud service providers
4 minute read

What is required in terms of designing the actual network and the connections needed? Topics such as peering relationships and transit provider selection are common when navigating this territory. In this blog we'll get into IP peering and why it matters to cloud service providers. 


On the internet, cloud service providers (CSPs) play an important role. They host software applications that are used by millions of people. The internet is made up of a collection of networks owned by various organizations. As a user, you can connect to any of these networks and access websites and software applications hosted on a variety of other networks. To ensure this connectivity, all of the networks that comprise the internet must be linked together.


Cloud Service Providers: owners of the network

Cloud Service Providers are the companies that own the internet's networks. In summary, CSPs are classified into 3 types.

1. Access CSPs 

Internet users connect to the internet through Cloud Service Providers (CSP). This category includes telecommunications service providers and wireline internet providers.

2. Hosting CSPs 

The majority of hosting CSPs are cloud service providers or managed service providers (MSPs). The primary distinction between the 2 is that the CSP provides basic resources and services, whereas the MSP provides fully managed environments. The providers' networks host the servers that host internet applications and content.

3. Transit CSPs 

Transit CSPs facilitate network interconnections to the other 2 types of CSPs. 

This categorization helps us to analyze how the providers interconnect their networks. However, it should be noted that a provider can belong to more than a single category. A telecommunications company, for example, could be an access CSP that provides internet to mobile users via 4G. At the same time, it could be a transit CSP that transports transit traffic belonging to another provider.

Interconnecting the networks 

As mentioned, all the networks on the Internet must be interconnected. This enables a user connected to any access CPS to reach any application hosted on any hosting provider, wherever on the internet. There are 2 methods of interconnecting the networks that belong to different providers. 

IP Peering 

IP peering is a direct link between 2 providers. IP peering is typically established between access providers and selected hosting or cloud service providers. It enables access CSP users to connect to applications hosted at those cloud providers with minimal latency. Because there is little traffic flowing between two access ISPs, there is no incentive for one to establish IP peering with another.

Although providers with such a peering agreement do not pay each other, this does not imply that IP peering is free. A physical connection between their networks is required for a provider to establish peering with another provider.

In addition, 2 CSPs can choose to establish IP peering via data center services. A cloud service provider with a global footprint often rents data center space from special companies that operate data centers as a service. These data center companies offer interconnections between different CSPs via data center switches as a paid service. Therefore, although there is no direct payment between the CSPs involved in an IP peering agreement, there are other cost components associated with peering. 

IP peering also necessitates mutual consent from both parties. Therefore, if peering benefits one CSP but not the other, the peering agreement may not be fulfilled.

IP Transit 

On June 2022, the internet connects over 109,000 networks. It is nearly impossible to connect all of these networks directly via IP peering. As a result, CSPs use IP transit services to connect with the rest of the CSPs and only implement IP peering with a limited number of them. An IP transit service is analogous to an internet-global address book with a large number of reachable addresses. The transit provider handles connecting to one of these addresses.

There are CSPs that provide IP transit as a service. They also have established connections in place with many other CSPs providing access and hosting. They offer IP transit services which are billed based on the bandwidth allocated. 


IP Peering for Cloud Service Providers 

Cloud service providers are the source of the traffic on the internet. They host various applications and content which are accessed by millions of users spread all over the globe. Therefore, most of the traffic on the internet originates at the cloud service providers and flows to access CSPs either directly via IP peering or indirectly via transit CSPs. 


IP Peering and User Experience 

Individuals or businesses that pay for cloud application hosting are the end users of cloud service providers. The application owners want their users to be able to access the software applications with as little latency as possible.

When a cloud service provider implements IP peering with an access CSP, the traffic from the cloud service provider can reach the users in that access CSP with a minimum number of intermediate hops. It reduces the traffic's latency and lowers the IP packet loss ratio, which is the number of IP packets that were unable to reach the end user. Both of these factors can improve the user experience for users at the access CSP, which leads to customer satisfaction with the cloud service provider.

A cloud service provider can maximize customer satisfaction by continuously analyzing traffic growth from various access CSPs and establishing IP peering agreements with CSPs that have rising traffic trends. Furthermore, cloud service providers must consider latency and prioritize peering agreements with CSPs that have higher traffic latency and growing traffic bandwidth.


IP Peering vs IP Transit Costs 

Both IP peering and IP transit involve certain costs. These costs vary from one CSP to the other. A cloud service provider must analyze these cost components to decide which CSPs to implement peering. Usually, it’s best to establish peering with the access CSPs who are responsible for a major portion of the network bandwidth of the cloud provider.  


How continuously analyzing can increase customer satisfaction

A cloud service provider can increase customer satisfaction by continuously analyzing traffic growth from various access CSPs and initiating IP peering agreements. IP transit and IP peering are critical services for the internet's operation. They rely on cloud service providers to deliver applications and content to internet users.

While IP peering improves the end-user experience, it is nearly impossible for a cloud provider to implement peering with all access CSPs. As a result, a cloud service provider must select which CSPs to peer with and use IP transit to connect with other CSPs while ensuring the best possible user experience. 


Tilaa: your preferred Cloud Partner

One nice benefit for Tilaa users is that they do not get charged for the egress data (data from the ‘server’ to the visitor) nor for the transit costs it implies. Tilaa guarantees to keep the data throughput and latency to an optimal level, being the highest throughput (data rate) and the lowest latency with as minimal hops as possible. 

Would you like to know more about Tilaa or be kept up to date on all developments in our industry? Then sign up for our biweekly newsletter, in which we keep you up to date on Tilaa developments and news in our field. 


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