Updated November 30 with information from Cogent

Press releases about IP interconnection agreements tend to be among the shortest ever written – and an announcement of an agreement between CenturyLink and Cogent today was no exception.

The two-sentence release noted simply that the agreement “allows the exchange of Internet traffic in a balanced, scalable and mutually economical manner to accommodate the growing use of the Internet.” A CenturyLink spokesperson declined to comment further on the matter and Cogent was not able to make anyone available to answer questions on this matter until next week. But based on a series of developments that have occurred in this area, it’s likely that the agreement calls for free traffic exchange – a big change from how things were a few years ago.

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Behind the CenturyLink/ Cogent Interconnection Deal
Agreements about IP traffic exchange have long been secret –and companies only began issuing press releases about them when these agreements became the focus of several high-profile disputes. Companies like Verizon and Comcast which, like CenturyLink, have many residential broadband customers, got into disagreements with companies like Cogent and Level 3 that operate backbone networks. In some cases those backbone networks serve content providers whose content the residential broadband customers consume. For that reason networks such as Verizon’s and Comcast’s (and CenturyLink’s) that serve many broadband customers are sometimes known as “eyeball” networks.

Disputes arose when operators of some eyeball networks wanted to charge the backbone providers because the backbone providers deliver more traffic to the eyeball networks than they receive from them – and according to some of the eyeball network operators, that also means a cost imbalance. Some backbone operators attempted to address the cost issue by deploying caching servers at locations throughout the eyeball network operator networks, thereby minimizing the distance traffic had to travel to reach end users and potentially minimizing the eyeball operators’ costs. In exchange, they asked for free traffic exchange, also known as free peering.

Some eyeball network operators gladly agreed to this, but others persisted in looking for payments and in some cases declined to upgrade network facilities at traffic exchange points to meet rising traffic levels if a backbone network operator refused to pay for traffic imbalances.

This got the attention of the FCC, which traditionally did not oversee IP interconnection agreements, instead letting the communications industry work things out on its own. When the commission reclassified broadband as a Title II telecommunications service earlier this year, it gave itself greater oversight capability –and as part of that order, the commission also said it would oversee IP interconnection agreements. Since then, FCC Chairman Tom Wheeler also has stated that even if the Title II ruling is ultimately struck down, there will be “no going back” on IP interconnection oversight.

Numerous parties have issued brief IP interconnection agreement notices in recent months and although the parties typically don’t discuss the terms, Cogent CEO Dave Schaefer reportedly has said that at least one of these agreements – the one between Cogent and Verizon – involves free traffic exchange.

Considering that and considering the regulatory climate, it’s likely that the CenturyLink/ Cogent agreement – and others that have been inked recently — are of a similar nature. And that could have broad implications moving forward.

What About VoIP Interconnection?
The new interconnection deals seem to be primarily focused on data traffic, but as the industry prepares for a TDM-to-IP transition, similar traffic exchange issues for voice traffic will be at the forefront. Traditionally small rural carriers have relied on paid interconnection to help cover the costs of bringing service to their territories, which are more costly to serve than urban areas. And as free IP data traffic exchange becomes more commonplace, some in the industry may view that as a precedent that they may also want to apply to VoIP interconnection.

Update November 30 – Cogent CEO Dave Schaefer confirmed on a call with Telecompetitor that “Cogent has never paid for interconnection agreements” and he said  that statement is still true after the signing of the CenturyLink agreement.

Schaefer said Cogent’s belief is that agreements should not be governed by traffic ratios but by “the breadth of the network and an agreement to carry traffic as far as possible.”

He said Cogent generally requires nine interconnection points in North America and six in Europe. If a carrier operates in Asia, Cogent also looks for interconnection there.

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