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How Transit Works, What It Costs And Why It's So Important

Feb. 24, 2014 2:35 PM ETCCOI, LVLT3 Comments
Dan Rayburn profile picture
Dan Rayburn

One infrastructure service that has gotten a lot of coverage in the media lately is transit, with many using the term incorrectly or defining it as something it's not. I thought it might be helpful to explain what transit it, the different types of transit services sold, a list of providers who sell it, what it costs and why it is so important to the Internet. There are a lot of pieces that make up the Internet including products like wholesale, transit, wavelengths, backhaul and others, which all share the same underlying optical transport infrastructure, which is the foundation for all Internet and IP services. Many of these terms are used interchangeably, but they shouldn't be as they all provide a very different function in the market.

In its simplest definition, transit is a "network that passes traffic between networks in addition to carrying traffic for its own hosts." The Internet is made up of a collection of networks, and in order to get traffic from one end user to another, all service providers, hosting providers and ISP networks need to have an interconnection mechanism. These interconnections, which allow the sharing of traffic, can be either direct between two networks or indirect via one or more other networks that agree to take the traffic. Many of these network connections are indirect as most providers don't have a global network footprint and as a result, the traffic will be sent through several different interconnections to reach the end user.

The commercial interconnect relationships that allow networks to directly and indirectly connect are referred to as peering and transit relationships. While both those terms are often used interchangeably, they aren't the same thing and they are many flavors of each. Peering is when two or more networks interconnect directly with each other to exchange traffic. While

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Dan Rayburn profile picture
Dan Rayburn is considered to be one of the foremost authorities, speakers, and writers on streaming media technology and online video business models. An avid blogger, author and analyst, Dan is often referred to as the "voice of the industry" and has been quoted in more than a thousand news items by nearly every major media outlet over the past twenty years. His blog (streamingmediablog.com) is one of the most widely read sites for broadcasters, content owners, Wall Street money managers and industry executives in the online video sector. His articles have been published by the WSJ, NYT, CNN, Huff Post, Fortune, Business Insider, Gizmodo and he has been interviewed on Bloomberg, FOX, CNN, CBS, CNBC, and NPR amongst others. Due to his expertise in the content delivery market, he has also received invitations to speak as a witness at hearings by both the U.S. Senate and U.S. House of Representatives on topics pertaining to net neutrality, telecom mergers and content delivery architectures. He is also the Chairman for the NAB Streaming Summit conferences that take place in Las Vegas and NY. nabstreamingsummit.com

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Comments (3)

pole65 profile picture
Mostly true but also confusing when you mix and match products (IP related Peering and Transit with VPN, CDN, etc--which are completely different types of products only common in that they use IP, but most services do today--and like discussing Greyhound bus service with UPS/Fedex). Not sure why you wrote this, but for the common non-industry reader, the only important thing to know is Transit as a "product" is low quality, low cost way to get internet connectivity (and noteworthy, some Transit providers have better quality than others, partly due to their peering relationships). Peering as you say is network to network, but doesn't mean that there isn't "transit" connectivity on the ends of the network to get the bit to where it ultimately goes. This is just part of constructing a network similar to a pipeline system having multiple paths and hubs (Peering being the hubs).

All the press about Cogent, Level3, Comcast, etc. and their peering negotiations is about asymmetric traffic patterns. If you don't exchange approx. same amount of traffic both ways, then the logic is that the party sending more than receiving should pay, otherwise they shut off service (this has caused some disruptions in customer experience).

Transit is an important part of major carrier revenues. Level3 used to report separately but not sure they do any longer. Price compression has been extreme in this segment of the telecom market, ultimately making high-speed internet access more available at lower prices to non-Tier I ISP's and enterprise customers (and ultimately consumers).

Again, why did you write this??? Is this supposed to move into the network neutrality set of issues??
Your comments were more interesting than the article itself although the author dug into a subject seldom discussed in investment forums and should be commended for that.

We see pictures and video of comm centers with neat rows of ceiling high cabinets, flashing lights at cable connections, and it all looks very orderly and efficient. Many years ago I invested in a company called Ascend Communications which ultimately bought another holding, Cascade Communications. The latter was in my back yard, the former California. Seeing Ascend racks as the prime connection point for networks at the time compelled a worthwhile investment decision. Seemed pretty simple then; several orders of magnitude than the comparable analysis today. Moral of the story, unless one understands the technology application, best to avoid the space.

Some time ago, I switched from DSL internet connection to our local cable provider. Aside from the obvious, a prime initial motivation came from observing repeated Embarq (now Century Tel) trucks parked along side of the common termination box of the typical telco phone network. Lots of head scratching, open doors overnight on occasion, a real rats nest of wires, etc. including my on-again off-again internet connection. One wonders what's behind those neat and seemingly orderly Transit cabinets of today. And, yes the Century Tel trucks still routinely visit the road side box - rain or shine.
pole65 profile picture
Interesting. those were the days. Cascade made equipment for what is now two outmoded protocols (ATM, Frame relay--both supplanted by Ethernet and IP) and Ascend made modem banks so home computers could "dial-in" and be converted to IP for internet connectivity. Thank goodness we don't have to do that any longer. There were still routers sitting behind the Ascend gear to move the traffic.

I actually have DSL based service in my home provided at ATT U-verse. It is amazing the a copper pair can provide up to 50 meg of bandwidth with the right distances. I have been fairly happy with u-verse, outside of its cost going up every year. You are right that the old twisted pair network is a rat's nest, but it serves it purpose and it pretty well documented, etc. by the old bell system. If you ever went inside a cable company operation center, you might be even more concerned about the quality of the physical plant! coax does have the advantage though of being able to pass thru more bandwidth for longer distances than twisted pair copper plant.

fyi, "Transit" connection isn't at the pedestal and maybe not even at the central office or cable company head-end. It is back further in the network where the local service provider interconnects with another provider. this job is performed by a router of some type (think Cisco or Juniper or Lucent or a number of other smaller providers). The embarq router would be connected to another service provider's router (say Level3) and they were exchange traffic with the packets going their merry way on to their ultimate destination (IP address). Cable plant functions the same way in the the coax cable ultimately runs back into the cable MSO's network to a final router that hands off the traffic.

So pick your poison for local service provider (local phone company, cable company, wireless provider, etc.) but in terms of this article and "transit", that takes place where the traffic is handed to another internet service provider.
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