For sure, that's the main reason of peering, not a cost saving 
Transit costs are certainly falling at a much faster rate than exchange
point ports. However, because most major exchange points are pushing
reasonably high ports (1Gbps and 10Gbps) to members, the challenge with
filling those ports makes transit ports a more viable solution in the
short term.
If you're willing to stick it out long enough, peering ports can become
as cheap as transit ports, but they will never give you 100% coverage
like a transit port can.
Mark.
Transit should cost more than peering and should never cost little more than the cost of a cross connect or a switch, given the load of additional responsibilities. I counter that if peering is cheaper than transit, you need to talk to your IX about it's cost models.
Errrr, countering that if transit is cheaper than peering, you should talk to your IX. The effects of posting when I haven't been awake for hardy more than ten minutes....
One more interesting thing.
If you buy IP transit, mostly you are paying by exact bandwidth, per
megabit. If you buy IX peering port, you are paying for port. This means
Tranist ports are overloaded or close to it, while IX ports usually
always have some extra free capacity.
In practice, this mean if your customer download some file using IX way,
speed will be much higher that same file reachable by IP transit.
So more peerings your uplink use - better performance of your network
connection you have
Peering and peering on an exchange are two different things. Peering at an exchange has several benefits other than the simple cost of transit. If you are in a large data center which charges fees for cross connects a single cross connect to an exchange can save you money.
Peering can also be a sales tool. If you buy from a VOIP provider and are peered with them your latency and such will go down. You also have more control over the QOS over that peer. This can be spun into marketing.
Not to toot our own horn but we put together a list of benefits for our IX customers:
http://www.midwest-ix.com/blog/?p=15
Also, a good article at:
http://blog.webserver.com.my/index.php/the-benefits-of-hosting-at-internet-exchange-point/
Justin
Justin Wilson j2sw@mtin.net
http://www.mtin.net Managed Services – xISP Solutions – Data Centers
http://www.thebrotherswisp.com Podcast about xISP topics
http://www.midwest-ix.com Peering – Transit – Internet Exchange
This depends entirely on how you run your network. If you run links hot,
you can't guarantee anything (keeping in mind that your less congested
exchange point ports does not mean other exchange point members are in
the same position also).
We, for example, buy transit or peer with a minimum of 10Gbps port, with
the ability to push traffic at line rate if needed. We do not allow
ports to run hot (typically upgrading them anywhere from between 50% -
70% utilization). I appreciate that not everyone can be in this
position, while others can be even more aggressive with their
"over-engineering", but this kind of information is hard to quantify
reliably.
There is also backhaul from the interconnect point into the backbone to
think about, but that follows a similar strategy.
Mark.
So why is IX peering so expensive?
Again if I look at my local IX (dix.dk) they have about 40 networks
connected. Each network pays minimum 5800 USD a year. That gives them a
budget of 240000+ USD a year.
But the only service is running an old layer 2 switch.
Why do these guys deserve to be paid that much for so little?
Recently we had a competitor show up in the form of Netnod. However the
pricing is almost exactly the same, although Netnod tries to deliver
slightly more service.
Seems to me that this an unsound market. The 40 dix particants should
donate 1000 USD once and get a new layer 2 switch. Why does that not happen?
Does not look like it is a local phenomenon either. IX'es all over are way
more expensive than they should be.
Regards
Baldur
So why is IX peering so expensive?
> But the only service is running an old layer 2 switch.
> The 40 dix particants should donate 1000 USD once and get a new
> layer 2 switch. Why does that not happen?
This is something like how TORIX was operated at the beginning. The
switch was donated by Cisco and rack space by a member with a cage at
a convenient spot at 151 Front -- I think this was jlixfeld at
look.ca. Fees were a $1/port/year peppercorn.
It has been a long time since I was in any way involved in that, but
today for a 1Gbps port TORIX charges $1200/year which is more but still
not as much as you say for other IXPs. It would be interesting to hear
from someone who was involved in TORIX at the time how this transition
from $1 to $1200 went and the reasoning behind it. My guess would be
moving to its own space and having to pay rent was a major part of it,
and possibly acquiring staff?
Also note that the LINX exchanges do not charge for the first 1Gbps
port (or the n-th at the regional exchanges) though there is a
membership fee which makes it roughly equivalent to what TORIX does
today.
From that point of view you guys in Denmark seem to be paying somewhat
over the odds.
Cheers,
-w
There is a revenue floor where it doesn't matter how much or how little service is provided, simply having a customer period requires a certain amount of revenue.
Route servers, IXP Manager, AS112, route collectors, DNS, etc. all cost money.
Maintenance costs money. The organization itself costs money. Upgrades cost money. Racks cost money. Power costs money.
I'm sure I've left some things out.
Getting networks to connect to an ix is Uber expensive in relation to the
overall costs. Specifically before critical mass is reached. Getting the
first X gig of traffic is a hard problem that takes money to fix.
So why is IX peering so expensive?
Again if I look at my local IX (dix.dk) they have about 40 networks
connected. Each network pays minimum 5800 USD a year. That gives them a
budget of 240000+ USD a year.But the only service is running an old layer 2 switch.
The age of the Ethernet switch has little to do with its performance,
unless it has everything to do with its performance.
Why do these guys deserve to be paid that much for so little?
The exchange point operator do not typically interfere with what the
members do. That said, while it is not their job to grow your peering
traffic, it would make thier exchange point more successful if they
managed to grow their membership.
Recently we had a competitor show up in the form of Netnod. However the
pricing is almost exactly the same, although Netnod tries to deliver
slightly more service.Seems to me that this an unsound market. The 40 dix particants should
donate 1000 USD once and get a new layer 2 switch. Why does that not happen?
Unless it is the case, the old switch should not prevent growth of the
exchange point, unless, of course, it currently does.
Does not look like it is a local phenomenon either. IX'es all over are way
more expensive than they should be.
Most exchange point operators have staff that run the network, find
members, e.t.c. These salaries need to be paid.
If a member is unable to extract the most value from their peering
setup, there is very little an exchange point can do about that.
In short, it's not for everyone, despite its good intentions.
Mark.
To be clear, we asked for $1/port/year, but we never really bothered to pay attention to who actually paid 
Instead of addressing your questions directly, how about a brief and much abridged history of TorIX?
The recollection of Mr. Waites on our humble beginnings is pretty much bang-on. For the first 7 or so years, we were really ad-hoc, but we eventually decided that we needed to incorporate. That decision was simply due to the fact that we didn’t think we’d be taken very seriously by larger players (larger eyeball networks or large content networks (either nationally or internationally)) unless we moved away from an ad-hoc collection of nothing and no-one, and into an actual legal entity. Along with feedback from the participates of our little IX, those of us who made up the organizing body of this ad-hoc TorIX decided that while a legal organization was an important next step in our evolution, incorporating with non-profit status (as opposed to a full-blown commercial IX) was the most appropriate method of becoming legit. Bill Campbell (former owner Hostopia, former owner Internet Direct (later became Look)) put up 100% of the money to incorporate TorIX in early 2004.
Second, up until about 2008’ish, whenever we needed gear, we’d usually have to pass the hat when we needed a GigE switch or something a little more high test than someone’s decommissioned FastE kit. The problem with passing the hat is that it rarely makes everyone happy because there’s always someone who gets left out. The cash in the hat would only give us enough to buy a 12 port switch, but inevitably, a few more than 12 participants all donated towards buying the switch. The last ones to offer up the cash had to be dropped until the next time the hat got passed around. We didn’t think asking all our participants to drop money into the hat was an appropriate course of action. Not everyone would contribute, for a multitude of reasons, but everyone would still expect the same level of service. Needless to say, it got messy. It was an inevitable part of our growth, sure. It might still be inevitable for any budding IX.
After our incorporation, there were many offers from folks with skids of decommissioned 6500s, 6704s and SUP720s. These extremely generous donations made it possible for us to turn up our first 10G port, but it resulted in other challenges: who would be allowed to occupy the other three ports? Do we charge for them? We got the ports for free so HTF do we figure this one out, guys? These sorts of dilemmas would cause strife, so around 2008, the serving Board at the time decided that the next step in our evolution was to make the organization completely self-sufficient by introducing a reasonable port fee structure. Port fees could let us get space where we felt we needed it. We could buy our own gear so anyone would always be able to have any speed port they wanted. We could pay for the support contracts, hire lawyers and accountants, and also contribute to community initiatives like sponsoring the Canadian ISP Summit, NANOG and ARIN. We strive to keep our port fees low. 99% of folks never thought our port fees were too high. In fact, I can remember a few folks who laughed when we introduced port fees asking if they could pay for 5 years up front because the port fees were so cheap they were a joke.
The Board introduced a reduced port fee structure across the board for 2015.
Everyone[1] who contributes to TorIX still does so in a volunteer capacity; Board members, the operations group, even our book keeper
[1]In 2014, the Board voted in favour of a motion to hire an Executive Director to further drive the growth of TorIX. In March, the Board announced that Bill Sandiford had accepted the role. In the 18 year history of TorIX, the Executive Director role is the first ever paid position at TorIX.
Mark, you realize that this is what NANOG will make sure is engraved on your headstone, right?
-Bill
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Choose another IX to peer. Or even make your own
Kiev have 3 major IXes, and price is about $100 for 10GE port.
Switch port costs will be governed by how the exchange point is run.
Low or no running costs will, theoretically, yield cheaper ports.
Mark.
That's generally good idea, but average TCP session speed depends not
only your side of connection, but another side as well.
It was always best effort :-).
Mark.
I also have a similar working document that I'd welcome feedback on to improve;
https://docs.google.com/document/d/1i2bPZDt75hAwcR4iKMqaNSGIeM-nJSWLZ6SLTTnuXNs/edit?usp=sharing
I've used it once to help an ISP evalutate peering and started them in
the world of public peering. I'm now going through that proces again
with another ISP and again they will start public peering soon, having
used this doc in both cases as an intro/FAQ for them.
Cheers,
James.