We have seen Cogent have peering disputes with Level3 and Telia. There are scuffles regularly, usually about the size of the peering point. Obviously, the "Tier 1" providers would rather sell transit that offer Peering. There's no money in Peering.
With the mergers of MCI+VZ and BST+AT&T+SBC in 2005, conditions were made pertaining to the status quo on all peering connections being maintained. However, it was a three year term agreement -- and unlike most telco contracts, this one doesn't auto-renew. Already AT&T is re-negging on its peering inter-connection with, not some small guy, but with Sprint. [ DSLReports].
First, let me make the note that by Tier 1 carriers, I mean, AT&T, MCI-UUNET-VZB, Sprint, Level3, PsiNet-Cogent, Qwest, Global Crossing and Verio. You might be able to make a case for AboveNet or Savvis (C&W USA), but basically I went with the carriers that Savvis, InterNAP, Mzima, and TWIX aggregate and resell.
Meanwhile, the price of IP is seemingly dropping, especially as it is being bought in bulk more and more. (By bulk I mean OC-12 or larger ports, where the price can be sub-$10 depending on the vendor and commitment). But I wonder how all this will shake out as Peering Inter-Connection Agreements are re-structured. Maybe Level3 will be fine because they have the largest Looking Glass -- L3's network sees more ASN's than any other. AT&T and MCI are next. If Ma Bell is will to go to battle with Sprint, what do other ISP's have to look forward to?
Certainly the economics of selling sub-$20 per MB bandwidth gets skewed when all bandwidth is transit now, instead of maybe 50% now. Peering points will become much more important. (As will CDN's). Limelight and Google already allow networks to connect with them at carrier hotels like Equinix and Telx. From the user experience, as long as the ISP's bandwidth touches 55% of the ASN's needed for its traffic, the experience should be fine.
The Exaflood will be interesting because current peering points would break down under that kind of Internet Usage anyway. (AT&T thinks that the international carrier community has to spend $155 Billion by 2010 in order to upgrade networks for the coming flood. I wonder if they were counting on the IPv6 forklift upgrade in that figure).
And that brings me to my final three points:
One, how will peering work when one stream is IPv6 and the other is still IPv4? I'm sure Cisco has hardware for this, but that will add latency to the peering point.
Two, what happens with backlash? The Internet is really an inter-connected collection of autonomous networks (LAN's and MAN's connected to a great big WAN). As with Cogent's outages, the fallout is a Butterfly Effect.
Finally, since Inter-Carrier Compensation has been on the agenda at the FCC for about 10 years, I cannot foresee the FCC being much help here. In fact, as I observe Martin's dalliance with Network Management (over the Comcast torrent issue), all I can do is cringe. The FCC nows has 9 lawyers to every Engineer. Do you really want Lawyers deciding issues such as Network Administration and Peering? I don't, but Peering is on my Radar.