A study of internet interconnection costs across cities and countries found that peering is substantially cheaper than IP transit. Using publicly available Internet exchange point (IXP) port prices, proprietary transit pricing data and a survey of IXP operators, researchers examined the period from 2018 to 2024.
The study, “Dissecting the Cost of Peering,” by Anirudh Tagat and Amreesh Phokeer, puts average peering costs at about $0.05 per Mbps per month, compared with approximately $18 for IP transit. The gap varied by region and year, but transit was tens to hundreds of times more expensive in the markets examined. Transit prices fell over the period, while peering retained a significant cost advantage.
Port fees accounted for around 44% of peering-related costs on average, according to the operator survey. Transport, colocation and cross-connect charges made up most of the remainder. The researchers said their main finding held even when they tested a scenario in which port fees represented half of total peering costs.
The analysis also associated greater savings from peering with lower consumer broadband prices, broader mobile coverage and higher overall telecommunications revenues. Each additional percentage point of peering savings was linked to an estimated $4.50 monthly decline in broadband prices and a 4.8 percentage-point increase in mobile penetration. Total telecommunications revenues rose by about 2.3 percentage points, while average revenue per user changed little.
The reported benefits were concentrated in moderately regulated economies and low- and lower-middle-income countries. The study emphasizes that the extent to which local networks participate in an IXP matters more than simply having an exchange point.
The authors argue that policymakers should include IXPs in national broadband and digital economy plans. They recommend supporting neutral, open, voluntary and commercially sustainable interconnection, alongside investment in data centers, domestic backbone infrastructure and access networks, rather than intervening in individual peering negotiations.
Sources: Internet Society.