Peer Dispute Leaves Some ‘Net Users in the Dark

Web sites went dark for some users on Wednesday morning, as one tier 1 ISP cut connections with a second.

Level 3 Communications disengaged its network from that of rival Cogent Communications around 5:45 a.m. The outages were reported on the HardwareGeeks community site, where business owners using Cogent or Level 3 reported being unable to access e-mail, being blocked from large areas of the Web, and VoIP not working.

Customers that use multiple providers may have no problems or experience minor slowdowns, but customers that receive their connectivity from a single provider, the so-called single-homed, may be blocked from accessing Web sites that are hosted on the other provider’s network.

Cogent CEO Dave Schaeffer estimated that Level 3 single-homed customers are blocked from approximately 12 percent of the Internet; Cogent’s single-homed customers can’t get to about 6 percent.

Internet service providers make peering agreements to route each other’s packets as an alternative to paying a third party for transport. But if one partner sends a lot more traffic to the other than it receives, the agreement can break down, with the partner carrying more than its share asking for money or additional transit as compensation for the extra strain on its systems.

Level 3 spokeswoman Jennifer Daumler said that after analysis of the peering agreement, the company decided it wasn’t commercially viable for us. “Peering relationships makes sense when two companies are relative equals,” she said. “In Cogent’s case, we saw an imbalance had developed where they were pushing a lot more traffic our way than we were their way.”

Cogent CEO Dave Schaeffer disputed that claim, saying that the two companies traffic was fairly equal. “Level 3 had requested for us to add traffic their way about a year ago, because they charge by the bit,” he said. “But, for the most part, traffic was effectively symmetric.”

This developed out of a standard tension regarding peering relationships on the Internet, said Daniel Berninger, senior analyst with Tier 1 Research. While in the early days, all ISPs peered, eventually things shook out to where the tier 1 players peered with each other but charged everyone else to carry their traffic. From time to time, a tier 1 company steps forward and tries to charge its fellows.

“It destroys the whole efficiencies of the Internet when, all of a sudden, you start counting packets and charge by the pound,” Berninger said.

Daumler said that Level 3 had notified Cogent more than 90 days ago to that it wanted to disengage the direct peering and discuss a different arrangement for carrying Cogent traffic. “They passed,” she said. Level 3 also warned its own customers, she said, before pulling the plug early Wednesday morning.

But Schaeffer said that Level 3 had sent administrative letters relating to agreements with companies that Cogent later acquired, but he hadn’t been aware of plans to terminate the peering agreement until he got a phone call around three weeks ago from a senior official pressuring him to raise prices.

“They made a unilateral decision to partition the two networks in response to the fact that they have made numerous attempts to try to coerce us into raising our prices,” Schaeffer said. “We have been unwilling to do so, so they thought they would exert additional pressure.”

Cogent and Level 3 are both Tier-1 ISPs, a loosely defined category that includes the top players.

Level 3 operates one of the largest Internet backbones in the world, and it’s both one of the largest providers of wholesale dial-up service to ISPs in North America and the primary provider of Internet connectivity for millions of broadband subscribers, through cable and DSL partners.

Cogent Communications is the largest provider of Ethernet services in the United States. Cogent specializes in providing businesses in the United States and Europe with high-speed Internet access and point-to-point transport services.

Cogent struggled before a 2003 bail-out by Cisco Systems , its primary vendor, and an influx of cash from VCs. But it’s been on an upswing since its December 2004 acquisition of most of Verio’s T-1 access customers. Its net service revenue was $33.8 million for the three months ended June 30, 2005, an increase of 65.8 percent year-over-year.

Level 3 reported consolidated revenue of $910 million for the second quarter 2005 compared to $1.01 billion for the previous quarter. But it’s struggling under debt incurred building a new network.

“My feeling is this is more of a competitive attack on Cogent,” Berninger said. “These are two companies that have opposite business models. Cogent is a low-cost player that essentially undercuts the price of the market. Level 3 is an elite player that charges a premium to connect to them.” Level 3 has been hoping that pricing pressures would diminish, but that hasn’t happened. Said Berninger, “My view is, this is an act of desperation.”

Berninger said both companies have immense excess capacity. He estimated that Cogent’s overall network utilization is around 5 percent, while Level 3’s is around 10 or 12 percent.

The conflict mirrors a 2003 outage that blocked AOL subscribers from MSN. While neither company would comment on the cause, some thought it was a peering dispute.

In 2001, Cable & Wireless dropped its peering agreement with struggling backbone provider PSINet. The cancellation left C&W users unable to access IP addresses on the PSINet network and vice versa.

Cogent is going after Level 3 customers with an offer of a full year of free service if they switch.

But Level 3 isn’t moving, Daumler said. “We’re committed to the business decision. Cogent will need to either enter into commercial agreement, or they’ll need to reroute. If they don’t, their customers will need to find an alternative.”

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