The Digital Handshake: Connecting Internet Backbones

Michael Kende, Director of Internet Policy AnalysisOffice of Plans and Policy

1/01/2005
(Original Publish Date: 2000)

This paper examines the interconnection arrangements that enable Internet users to communicate with one another from computers that are next door or on the other side of the globe. The Internet is a network of networks, owned and operated by different companies, including Internet backbone providers. In order to provide end users with universal connectivity, Internet backbones must interconnect with one another to exchange traffic destined for each other's end users. Internet backbone providers are not governed by any industry-specific interconnection regulations, unlike other providers of network services; instead, each backbone provider bases its decisions on whether, how, and where to interconnect by weighing the benefits and costs of each interconnection. Interconnection agreements between Internet backbone providers are reached through commercial negotiations in a "handshake" environment. Internet backbones interconnect under two different arrangements: peering or transit. In a peering arrangement, backbones agree to exchange traffic with each other at no cost. The backbones only exchange traffic that is destined for each other's end users, not the end users of a third party. In a transit arrangement, on the other hand, one backbone pays another backbone for interconnection. In exchange for this payment, the transit supplier provides a connection to all end users on the Internet.