Peers or not? Cogent, Level 3 disagree

A war of words has broken out between Cogent Communications and Level 3 Communications, after the latter terminated a peering agreement between their two networks.

As a result of the termination, Cogent and Level 3 customers who don’t also have connections to other Internet backbones, such as those provided by MCI, AT&T or Sprint, will not be able to communicate.

The squabble is the first public debate in some time over peering arrangements, which normally are negotiated behind closed doors.

“Level 3 is thinking that Cogent’s customers will scream more because they cannot connect to Level 3 customers than Level 3 customers will scream because they cannot connect to Cogent,” said Andrew M. Odlyzko, a professor in the University of Minnesota’s Digital Technology Center.

Typically, larger service providers agree to peer with each other, essentially terminating Internet traffic for each other at no charge, for their mutual benefit. Smaller providers have been forced to pay settlements to have their Internet traffic traverse the backbone of larger players.

According to Cogent CEO Dave Schaeffer, there is no size disparity between his company and Level 3 that would require Cogent to pay for terminating calls. Instead, he says, Level 3 is pressuring his company to increase its Internet access prices because its own revenues are under pressure.

“Both parties are in full compliance with the agreement,” he said. “What Level 3 has decided to do primarily to Cogent is to unilaterally terminate the agreement. They are under a tremendous amount of pressure to increase revenue to be able to make their debt payments. So they are putting pressure on us to increase our prices.”

Cogent currently charges $10 a month per megabit for Ethernet-based Internet access, and has been growing its customer base at a compound annual growth rate of 250%, Schaeffer said.

Level 3 maintains that it terminated the peering agreement after its internal analysis showed an in-balance of traffic that worked in Cogent’s favor. According to a Level 3 spokeswoman, the company has been in negotiations with Cogent and other service providers whose peering agreements it has terminated, in order to establish a fair settlements process, but has been unable to reach a satisfactory agreement with Cogent.

Cogent is both the low-price leader in metro Ethernet and the largest U.S. Ethernet provider, according to an Ovum-RHK report from June of 2005. Odlyzko said the volume of traffic on a network doesn’t tell much about the value of that traffic, nor does it definitely predict whether there is an in-balance between two networks, as Cogent is claiming.

“One of the unfortunate aspects of the fact that there is no government standard for peering or tracking of peering agreements is that we don’t know if peering or settlements are growing or shrinking,” he said. If such disputes proliferate, however, smaller companies who don’t have multiple service providers will find themselves cut off from parts of the Internet and unable to exchange email in the open fashion to which most have become accustomed.

Cogent is addressing that immediate problem by offering 12 months of free access to any Level 3 customer who wants to connect to its customers, Schaeffer said. And the company continues to peer with other Internet backbones.

“We have those types of agreements with 425 different service providers globally, and we connect to various networks around the world at 42 locations and exchange traffic on a settlement-free basis throughout the world and with companies much larger than Level 3,” he said.