What Is The Difference Between Peering & IP Transit?

Peering & IP Transit Differences


Peering, better stated as IP peering is the agreed-upon exchange of data between two ISPs and the amount of data exchanged is generally very close to equal. IP transit is when one entity pays another for the right to transit its upstream network. This removes the need for either party to pay a third party.

In most cases, the relevant ISPs do not charge for this agreement because both parties will share the benefit of the arrangement so this procedure is termed “Settlement Free.” It is a basic agreement by both parties to establish a no-charge exchange.

IP Transit

In the activity of IP Transit, a designated service ISP enables traffic to move through their network to its final destination. No matter how your business connects to the Internet, you will need to use IP transit to some degree. IP Transit is a service where an Internet Service Provider (ISP) allows traffic to travel through their network to its final destination.

IP transit is when one entity pays another for the right to transit its upstream network. In this arrangement, one entity is higher than the other in the hierarchy so there is no longer a peering relationship from an internet standpoint because both parties do not benefit equally from the exchange. When enterprises connect to an ISP for the purpose of reaching the entire internet, it is known as IP transit. This should not be confused with connecting to an ISP over border gateway protocol (BGP) peering for internet connectivity. BGP peering is a network definition, not an ISP definition. Additionally, peering is only for a participant’s prefixes and their directly connected peer.

Breaking it down

In terms of a peering life-cycle, a helpful point of view is from a routing standpoint.

In specific terms, the routing network exchange between routing peers. Moving through the life-cycle. the received routes become more concise as the destinations become more concise.

You must be very careful to maintain routing equipoise because of the potential for several types of peering based on data flows to discrete destinations. Entities must remember that peering is a mutual agreement so collocation and IX providers are in place to allow for a connection. That said, organizations should keep in mind that these connections must be of mutual agreement so a fair amount of research into each entity is recommended.

For IP transit, you should look for a collocation provider with a rich ecosystem of providers to provide IP transit as the lowest-cost way to reach all internet destinations on a cost per megabits per second (Mbps) basis.


The Internet is made up of over 25,000 independent systems that autonomously route the movement of traffic. Peering is often utilized as a conduit for the interaction and synergy of traffic to move over the Internet from one end-user to another end user.

When enterprises are connected, peering is essential for all Internet Service Providers, Content Delivery Networks, and backbone service providers.

Peering agreements remove third party agreements as follows:

✔ Much lower transit costs

✔ Greater control of routing networks

✔ Superior network performance

✔ Increasing redundancy by using multiple stations

✔ Increase bandwidth capacity

✔ Utilizing peering partners to enhance support systems

Key Takeaways

  • Both public and private peering open vital avenues for two networks to connect at a collocation and exchange traffic directly without having to pay a third party to carry traffic across the Internet.

  • To enter into a peering agreement with most Internet service providers, you must have at least a publicly routed ASN, one block of public IP addresses, and a network edge router capable of running Border Gateway Protocol.
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