Peering is voluntary interconnection of administratively separate Internet networks for the purpose of exchanging traffic between the customers of each network. The pure definition of peering is settlement-free or "sender keeps all," meaning that neither party pays the other for the exchanged traffic, instead, each derives revenue from its own customers. Marketing and commercial pressures have led to the word peering routinely being used when there is some settlement involved, even though that is not the accurate technical use of the word. The phrase "settlement-free peering" is sometimes used to reflect this reality and unambiguously describe the pure cost-free peering situation.

Peering requires physical interconnection of the networks, an exchange of routing information through the Border Gateway Protocol (BGP) routing protocol and is often accompanied by peering agreements of varying formality, from "handshake" to thick contracts.

How peering works

The Internet is a collection of separate and distinct networks, each one operating under a common framework of globally unique IP addressing and global BGP routing.

The relationships between these networks are generally described by one of the following three categories:

• Transit (or pay) - You pay money (or settlement) to another network for Internet access (or transit).
• Peer (or swap) - Two networks exchange traffic between each other's customers freely, and for mutual benefit.
• Customer (or sell) - Another network pays you money to provide them with Internet access.

Furthermore, in order for a network to reach any specific other network on the Internet, it must either:

• Sell transit (or Internet access) service to that network (making them a 'customer'),
• Peer directly with that network, or with a network who sells transit service to that network, or
• Pay another network for transit service, where that other network must in turn also sell, peer, or pay for access.

The Internet is based on the principle of global reachability (sometimes called end-to-end reachability), which means that any Internet user can reach any other Internet user as though they were on the same network. Therefore, any Internet connected network must by definition either pay another network for transit, or peer with every other network who also does not purchase transit.

Motivations for peering

Peering involves two networks coming together to exchange traffic with each other freely, and for mutual benefit. This 'mutual benefit' is most often the motivation behind peering, which is often described solely by "reduced costs for transit services". Other less tangible motivations can include:

• Increased redundancy (by reducing dependence on one or more transit providers).
• Increased capacity for extremely large amounts of traffic (distributing traffic across many networks).
• Increased routing control over your traffic.
• Improved performance (attempting to bypass potential bottlenecks with a "direct" path).
• Improved perception of your network (being able to claim a "higher tier").
• Ease of requesting for emergency aid (from friendly peers).