Transit vs. Peering
BGP is the technical mechanism, but the business relationships that dictate how BGP is configured are where things get political. Two fundamental relationship types govern how networks connect.
1. Transit (The Customer-Provider Relationship)
A smaller network pays a larger network to carry its traffic to the rest of the internet. The larger network is called a transit provider or upstream provider. The smaller network is the customer.
- The customer pays a monthly fee, often based on the volume of traffic (measured in Mbps or Gbps at the 95th percentile — the "95th percentile billing" model).
- The transit provider advertises the customer's IP prefixes to the entire internet, and routes all internet traffic back to the customer.
- Analogy: Paying a toll to access a highway system that connects to every city.
Tier 1 Networks are the largest transit providers — networks so large and well-connected that they don't need to pay anyone for transit. They reach the entire internet purely through peering agreements with other Tier 1s. Examples include AT&T, NTT, Lumen (formerly CenturyLink), and Telia. If you're not a Tier 1, you pay someone who is (directly or indirectly).
2. Peering (The Handshake Deal)
Two networks of roughly equal size agree to connect directly and exchange traffic destined for each other's customers, typically settlement-free (no money changes hands).
- Why? It's mutually beneficial. Direct peering is faster (fewer hops), cheaper (no transit fees for that traffic), and more reliable than routing through a third party.
- Peering only covers traffic between the two networks' customers. If Network A peers with Network B, Network A cannot use that peering link to reach Network C — it must use its transit provider for that.
- Analogy: Two neighboring farmers agree to maintain the shared fence between their properties at equal cost, because both benefit equally.
Internet Exchange Points (IXPs)
Rather than running a dedicated cable between every pair of networks that wants to peer, networks meet at Internet Exchange Points (IXPs) — physical facilities where hundreds of networks connect to a shared switching fabric. By plugging into an IXP, a network can peer with dozens or hundreds of other networks through a single physical connection.
Major IXPs include DE-CIX in Frankfurt (one of the largest in the world, handling over 10 Tbps of traffic), AMS-IX in Amsterdam, and LINX in London.
A common interview question: "What's the difference between peering and transit?" The trap is giving a purely technical answer. The complete answer has two layers: (1) Technical — peering exchanges routes only between the two networks' customers; transit provides full internet routing. (2) Business — peering is typically settlement-free between equals; transit involves payment from customer to provider. Interviewers at ISPs, CDNs, and cloud providers expect you to know both dimensions.
Key Point: Transit involves payment for global internet access; peering is a settlement-free exchange between networks of similar size and traffic volume. Most large networks use a combination of both — peering where possible to reduce costs, transit for coverage gaps.