Peering Break Even Point

Definition: The Peering Break Even Point is the point where the unit cost of peering exactly equals the unit cost for transit.

Peering Break Even Graph

When choosing between simply purchasing Internet Transit at a metered rate versus peering some traffic away at a monthly recurring rate, we have to make some adjustments so the two are using the same units. We normalize the monthly cost of peering to $/Mbps by dividing the monthly cost by the of traffic peered. As we peer more traffic, the unit cost drops. Where the two amounts are equal, an ISP is financially indifferent between peering and transit, a point we call the Peering Break Even Point.

This analysis recognizes that there are in fact some costs associated with Internet Peering, and as one captures more of those costs into the analysis, the monthly cost of peering increases. The important point is that we end up with an apples to apples comparison.


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