Competitive conditions on transit and peering markets

The connection between networks (Autonomous Systems) of different operators takes place via peering agreements and transit connections.

Commercial transit providers typically offer their customers access to or reachability for the entire internet. In contrast, peering only grants mutual data exchange between the networks of the parties involved (and to their respective customers who are connected to those networks). In order to avoid transit costs and/or to increase the quality of network interconnection through peering, network operators can interconnect (peer) either at public internet exchanges or directly with one another.

With the popularity of over-the-top audio and video streaming services, end-users in particular are creating an increasingly asymmetric data flow between the networks of their Internet Service Providers (ISPs) and their interconnection partners, who primarily route this content. With the help of Content Distribution Networks (CDNs), popular content is stored by service providers in geographically distributed server architectures, thus minimising the distance between end customers and the storage location of the content. This also reduces the distance relevant for data transmission to the end customer, thus avoiding a large number of (potentially congested) nodes and paths and thereby increasing transmission quality.

Against this background, this study first takes up the forecasts and economic conclusions of the BEREC study on IP interconnection from 2017, validates them and supplements them with further subjects of investigation, in particular aspects of digital sovereignty. Moreover, the market and competitive developments of the last five years in the field of IP interconnection are reviewed and the trends of the coming years in the industry are identified.