Most people think of the internet as their personal playground. Yet this particular playground has bullies just like any other. The internet itself is not a continuous band of service provided at one location. It is an interconnected network of networks. These networks are small, large and in-between and share data through IP peering.
The internet works through the interconnectedness of various networks providing data, whether that is voice, raw data or streaming services to various end consumers. Transit peering means one network pays another for the right to distribute data over their network. A peer relationship means that two networks share data without any form of payment. Customers in networks are paying customers that gain access through payments.
The establishment and original development of the internet was for military and government use of sharing data. The top tier of the internet today is still comprised of these players, but also has other commercial players in the top tier as well. This tier is more defined by how information is shared among these large networks. It is done through IP peering or more frequently called settlement-free peering. This designation notes that the largest networks share data on roughly equal footings, and therefore receive and send data without a cost associated to this sharing.
Tier one networks is somewhat of a fuzzy collection of top networks, but as agreements between private companies are not always known the ability to determine actual tier 1 networks becomes hazy. As an example, most large telephone companies are considered tier 1 network providers, yet they can have private transit agreements with other carriers. A transit agreement is an agreement to charge for the transfer of data between network providers. A tier 1 network can generally cover data transfer within its area of operations to the end user. Generally Tier 1 networks include the largest providers in the world, AT&T, Verizon and other providers in their respective countries.
These providers have IP peering agreements with some providers but still need to pay transit fees to others for delivery to the end user. Tier 2s tends to focus on regional coverage and need the purchase agreements to deliver services outside their region or area of focus.
At this level the provider pays for all voice and data transfer and sharing. Quality and access to internet speed and volume diminishes the further from a Tier 1. Therefore although the pricing for third tier providers are inexpensive their quality of providing continuous service without interruption can be affected sooner than the other two tiers.
IP peering is essentially what has kept the internet virtually free over the last two decades. However there are pressures mounting that want to see more fees introduced for transit costs, as the top tier providers have consolidated providing a much smaller pool of providers at the top level that are willing to share data without imposing fees. The second and third tier providers represent about 90% of providers and the to tier about 10% as far as number of companies, but the top tier provides the majority of the infrastructure for connectivity. This battle still looms on the horizon.