Hi Douglas,
The words you're using here are very strange but I think you may be
trying to ask if "settlement free peering" can be anticompetitive.
Yes, it can, but from the way you talk about it I think your
understanding of when and how is probably upside down. It has little
or nothing to do with dumping or other forms of cross-subsidy.
Let's start with some terminology.
"Settlement free peering" is business practice in which two
organizations place routers physically next to each other* and trade
network packets which are sourced from one of the organization's users
and destined to the other organization's users. This differs from a
normal business relationship between Internet companies in several
important respects.
1. Both organizations pay their own direct costs to place their
routers next to each other.
2. Neither organization pays the other any money. They do not "settle
up" with each other depending on the packets transmitted, hence the
packet trade is free of any settlement settlement process.
3. Only packets which are from one organization and to the other are
transmitted via the connection. Unlike a normal "transit"
relationship, the settlement free peering connection links neither
organization to the Internet at large. Rather it connects them only to
each other.
The idea is that directly connecting both reduces cost for both
parties and improves the customer's experience by providing faster
data transmission between the parties.
Organizations which engage in settlement free peering generally have a
"peering policy." This policy describes the circumstances in which
they seek to or are willing to establish settlement free peering with
other organizations. Their peering policy is said to be "open" or
"closed" depending on the manner in which they select their peers.
An "open peering policy" is one in which, within reason, an
organization agrees to engage in settlement free peering with every
other organization which asks to do so. The two organizations either
place routers in a mutually agreeable location or the asking party
places a router somewhere that the asked party is already present.
A "closed peering policy" is one in which the organization is very
selective about who they will establish settlement free peering with.
Even if the other organization is willing to place a router next to
theirs, they will only trade packets for free if the other
organization has specific business characteristics which meet with
their approval.
Finally, "paid peering" is exactly like settlement free peering except
that one organization pays the other for the connection.
As you can probably guess from the terminology, it's practically
impossible for an organization with an open peering policy to drive
anticompetitive behavior with settlement free peering. The same
business relationship is open to all seekers; they have but to ask.
The question gets more interesting where one or both have a closed
peering policy and offer paid peering to organizations who do not
qualify for settlement free peering.
Now, moving on from fact to opinion, closed peering policies can be
and often are anticompetitive. The peering policies typically have two
components: high data rates (exclude anyone who isn't already an
industry titan) and comparable bytes in and out (make content
providers who send more than they receive, like Netflix, pay us).
While industry leaders don't negotiate the list of folks they will and
won't peer with, they nevertheless all pretty much arrive at the same
list.
Anyway, hopefully this information is helpful to you.
* The routers don't necessarily have to be physically right next to
each other but that case is easiest to understand and the variants
where they aren't are functionally identical.
On a related note, it's been my experience that while cross-subsidy
exists in the Internet transit industry, it's not one of the critical
sources of anticompetitive behavior. The two primary sources are
things like the subtle collusion involved in closed peering policies
and product tying where many valuable services like a wavelength on a
last-mile PONS line cannot be purchased independently of the Internet
service lighting that line.
Regards,
Bill Herrin
