Peering into the future: peering and transit are the two most established methods to exchange internet traffic over different carrier networks. But another method is now emerging to challenge the old order—'advanced peering'

Telecommunications International, August, 2003 by John Williamson

Bust a glut?

Marson thinks it's probable in the future that the capacity glut will disappear on some routes. "We did an analysis of the US broadband market last year and we think that at the current rate of lighting they will run out of capacity in the next year to 18 months," he comments.

XchangePoint agrees. "In the longer term it is quite likely that the current capacity glut will exhaust itself, and we may even see supply/demand shortage/surplus cycles in the cost of transit as in other markets--for example, semiconductors," says Mitchell.

Lighting new fibre to meet any future capacity shortfall on particular routes-may not be viable for many tier 2 and 3 service providers if current constraints on capex continue. Goetsch believes that, as a consequence, the industry will witness the speeding up of an already discernible trend away from 'network build' to 'network buy'. "Two or three years ago most companies wanted to build their own network infrastructure," he says. "Today, everyone's really open to outsourcing network infrastructure, either by capacity or by service. "

In an unpredictable future, Mitchell predicts that success will go to the ISPs who are able to readily mix and match interconnect solutions. "In such an environment, the ability for an ISP to flexibly adjust its optimal balance of transit and peering without having to make major structural changes is a key advantage," he concludes.

Internet traffic still on the up

While it's possible to find analyses that warn of a slowdown in internet traffic growth rates, a 2003 report from the IDC consultancy--Worldwide Bandwidth End-User Forecast and Analysis, 2003-2007: More is Still Not Enough--predicts that the volume of global internet traffic will nearly double annually over the next five years, increasing from 180 petabits per day in 2002 to 5,175 petabits per day by the end of 2007.

"Some industry observers have speculated that slowing growth in internet traffic is at the root of the current telecom malaise, but IDC research shows that not only is internet traffic growth strong, but it will continue at near triple digit rates over the next five years," states Sterling Perrin, the company's senior research analyst for optical networks.

There are a number of catalysts at work here, quite apart from the on-going enlargement of the narrowband wireline internet user population and the boost that flat-rate internet access gives to traffic volumes.

First is the escalating uptake of broadband DSL access, cable modems and corporate metro ethernet services. A recent analysis from the UK-headquartered Ovum consultancy, for example, suggests that DSL deployments are currently beating earlier forecasts. At the beginning of 2002, the company forecast that there would be 35.3 million DSL lines installed worldwide by the end of that year. It now believes there were 36.3 million installed, or almost double the figure at the beginning of 2002.

"During 2003, we can expect rapid growth to continue, although not at exponential growth rates," says Ovum chief analyst, Julian Hewett. "We forecast 55 to 60 million DSL lines worldwide by the end of 2003. "