January 24th, 2005

Internet Interconnection Settlement


Remember I wrote about Internet Peering settlement last year? Well, Geoff Huston just published an excellent article which goes into great detail on various financial settlement model. Check it out!

Efforts to extend this regulatory activity to the area of regulated interconnection and peering have been investigated by various national regimes, but with little in the form of regulatory outcomes to date. Attempts to impose measures of mandatory domestic SKA peering at nominated exchange points tend to create an environment where there is a disincentive for larger players to aggressively invest in further infrastructure given the ability for smaller players to leverage this investment to their advantage without making comparable investments of their own. This has the risk of leading to an excessively fragmented serviced industry where natural economies of scale are not realized, and the consumer base is exposed to an inefficient supply industry which inherently imposes price premiums at the retail service level. The issue here is the supply of Internet services is not an end in itself – the objective is to ensure an efficient and effective service industry that provides the necessary foundation for other economic activities that can themselves leverage the capabilities of the Internet.

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