A Buyer's Guide to IP Transit Pricing

IP Transit is a business-critical connectivity service for any organization that delivers digital user experiences to customers, subscribers, or other end-client users. Whether you’re a content, data center, cloud or hosting provider, or an “eyeball network” Internet Service Provider (ISP), you need high-speed bandwidth and reach to the global Internet.  

In this article, we’ll give you some tips for evaluating IP Transit pricing so you can make the best-informed buying decision. 

Pre-Reading that Will Help 

Before we delve specifically into how you evaluate how you’ll pay for your Gbps of IP transit services (Mbps are not applicable for IP Transit as opposed to home broadband Internet Access or DIA), reviewing contextual topics is helpful. That’s why we wrote a guide to understanding the Difference between Tier 1 and Tier 2 ISPs and an overall guide on How to Choose an IP Transit Provider. These guides go beyond essential technical topics like understanding the Border Gateway Protocol (BGP) routing and IPv4 and IPv6 addresses. Our guides help you understand and evaluate technology, provider business, and service model considerations. In addition, if you want excellent pricing trend information, we recommend looking at posts from analyst firm Telegeography. 

Five Tips to Evaluate Internet Transit Pricing 

We aim to give you insight into how to evaluate IP Transit pricing and how to make a more intelligent buying decision. As a result, we’re starting from a business lens and then proceeding to the basics of IP Transit service pricing. 

1. Price to your required performance

In an industry as well-developed as Internet connectivity, you’re going to encounter a lot of different pricing points, and you’ll also see a ton of commoditized features. Search online by inserting any given [company name] + ISP, and they’ll offer you multi-homed connections from your routers, IP addresses, and 1-400 GigE connections. Everyone claims high performance and low latency. It’s easy to be thrown by all commonalities. 

So, the first and most important tip is to have clear outcomes defined, particularly in terms of price vs performance. Are you okay with less-than-stellar performance at all times? Or will you require consistently high quality? Knowing your performance tolerance is the key to getting the best service for the price. 

This is important because ISPs may lead with their branding (“We’re one of the biggest ISPs,” “We’re a Tier 1 ISP”, etc.) or breadth of offerings (“We have 45 other services including data centers and dedicated servers that we can bundle together”). But those may come with the compromise of less consistent or lower quality network performance on the IP Transit service. Not all networks are created equally. Not all network providers focus on delivering performance to the same degree. 

Network providers that offer higher performance are typically characterized by: 

• Open peering policies 
• Peerings with smaller and regional networks to provide more direct paths and lower latency to more end-user "eyeball” audiences 
• Use of their backbone networks to transport traffic when needed 
• Service offerings that not only offer an SLA but also include visibility tools 

If you are sensitive to performance, we recommend assigning a positive 5% weighting for providers that show evidence of solid performance engineering. If a provider has a history of poor performance, we recommend a negative 5% weighting. 

2. Price for the service model you want to consume

The telco industry service model is old and notorious for slow sales processes, opaque pricing, and bureaucratic operations and support. If traditional telco service model constraints do not meet your needs, you’ll need a provider who offers a modern, cloud-like service model that includes the following: 

• Self-service ordering, provisioning, and service management 
• Transparent pricing 
• Open APIs 
• Direct access to expert support versus long escalations through trouble tickets 
• Easy deployment of technical levers such as BGP communities 

The difference between modern and traditional service models has significant value because it impacts your technical operations. If you require a modern service model, we recommend assigning a 5% weighting in favor of providers who offer it. 

3. Price based on ASN credibility

Evaluate the technical credibility of potential Transit ISPs by performing a ranking of Autonomous System Numbers (ASNs) on sites like bgp.tools. The top 100 ASNs can all be considered credible in general. You’ll find the top names in the industry, including Tier 1s, like NTT, and credible Tier 2s that you might not have known before.  

Just be cognizant that ASN rankings mainly relate to the scope of the provider’s Internet reach rather than quality or performance. Nonetheless, it is a fundamental quality bar that your IP Transit provider should clear. 

We recommend that providers that rank in the top 100 ASNs be positively weighted by 5% versus providers that are not. 

4. Price based on location or regional relevance

Location is a primary consideration for establishing connectivity. If a region (for example, Europe, North America, or Africa) is a core market, it’s worth considering a regionally specialized provider. Commitment and focus on the market often come with more locations over time, better performance tuning in that region, local support, and strong relationships that can help you achieve your goals.  

5. Price based on fundamentals and features

The fundamental components of IP Transit pricing you’ll need to consider: 

• Ports: a monthly cost plus a one-time setup fee. 
• Committed versus burst bandwidth: The more Committed Data Rate (CDR) you are willing to commit to, the lower your base rate and the lower the burst usage rate (typically measured at the 95th percentile) will be. Sometimes, providers will offer a flat rate that doesn’t provide for bursting. 
• Contract length. Modern providers should allow anywhere from monthly to multi-year commitments, with discounting based on the commitment length. 
  

Aside from those fundamentals, you should consider additional features in your price/value assessment. For those investing significantly in their network, infrastructure protection is a prime example: 

• Security included—does the Transit service offer any included security features such as baseline DDoS protection? 
• Advanced security options—does the Transit service offer advanced DDoS protection that is easy to add now or later if desired? Will adding such features require major network reconfigurations, or can it be deployed in a very short period? 

Conclusion 

Whether you’re a content provider, hosting provider, or Tier 3 ISP, smart buying of IP-Transit ensures the best service quality to your users. As a Pan-European Tier 2 IP Transit provider running a highly ranked ASN (AS 5405) with connectivity from hundreds of data centers across Europe, we have a point of view, and we believe our services are a winner for all the reasons we stated above.  

You can learn more about our highly ranked network, IP Transit, and IP Access services, as well as integrated DDoS protection and multi-service support for Flex Ethernet connectivity. You can check out our transparent pricing and order/provision like the cloud via our self-service portal.