Peering is the process of exchanging Internet traffic directly between networks instead of passing calls through the open Internet. That probably requires a little explanation and an example. Let’s say that you’re at home and you request to look at a website for a bookstore. You do this by typing in a web URL (the name of the website). Regardless of where that bookstore is located – in your town or across the country – your request is routed by your ISP to the open Internet. Every ISP has connections to reach the web that we generically call backhaul in the industry. In plain English, that means a fiber route from the ISP to the Internet.

Some ISPs buy connections directly at the major Internet hubs in places like Kansas City, Washington DC, Atlanta, etc. Many ISPs instead send traffic to a closer point of presence, and the request gets passed on by somebody else to the primary Internet hubs. The major Internet hubs then route the request to the region of the country where the website for the bookstore is hosted. The closest hub to the final destination will hand the request to the ISP that hosts the website. Once your request reaches the website of the bookstore, the process is then duplicated in the reverse direction so that the signal is sent back to you to interact with the website.

Peering is a process that bypasses this normal routing. If your ISP has a peering arrangement with the ISP that hosts the bookstore website, your request would be handed from your ISP directly to that ISP without the intermediate steps of passing through Internet hubs.

There are two major benefits of the peering arrangement. First, it’s faster. There is extra time required to pass through intermediate hubs. In a peering arrangement, the request would go to the ISP that hosts the bookstore website. The bigger advantage is that peering saves money for both ISPs. ISPs must pay to transport traffic to and from the Internet and also pay for the usage at the major Internet hub. When this particular request is sent through a peering arrangement, your ISP avoids paying to use the major Internet hubs.

Peering makes the most sense and saves the most money when it can bypass Internet hubs with large amounts of traffic, so the most common peering arrangements connect with companies that generate a lot of web traffic. The three largest users of bandwidth for residential ISPs are Google, Netflix, and Facebook. All three of those companies are willing to enter into a peering arrangement with an ISP if it saves money. These companies also like peering because it improves performance for users.

Large ISPs probably all peer directly with these large web companies and others. It’s unusual for big web companies to peer directly with a small ISP. However, there are a number of places around the country where small ISPs pool their traffic to peer with the large web companies. These regional peering hubs might be owned by one of the ISPs or perhaps by a third-party.

Peering can save a lot of money. I talked to several of my clients who take advantage of peering, and they claim that peering saves them from sending from 30% to 65% of their traffic through the open Internet – depending on the specific nature of the peering arrangement.

Peering with the large web companies is not free, and an ISP must provide the transport to meet the peering partner. But this still can save a lot of money compared to paying for broadband usage at the major Internet hubs.

There is another kind of peering that is talked about less, but is widely used, which is private peering. Another name for this is creating a private network that bypasses the Internet. One of the biggest examples of this is the Internet2 network, where universities pass large volumes of usage directly between each other without going through the Internet. The federal government has a huge private network for government and military traffic. Many companies pay a for private network between different branches of the company. It’s common for schools in a region to be networked together in a private network.

If an ISP isn’t peering today, it’s worth asking around to see if any peering opportunities are available to you. If you are in a region where none of the small ISPs are peering, it might make sense to work together to create a peering arrangement for the region. All that’s generally needed to justify a peering point is to aggregate enough traffic volume to make it worthwhile to the big web services.