The traditional world of Internet peering is undergoing radical change with the commercialisation of the Internet. The result may be the emergence of a running battle between the Internet backbone providers and ISPs, before the two agree on the creation of a new interconnection regime.

The structure of interconnection agreements in the past has been based on a non-commercial model, bundled up with the notion that the Internet is 'free'. Yet these models are being reassessed with Internet backbone providers no longer prepared to remain bound by Internet interconnection arrangements which fail to take adequate account of associated infrastructure costs.

Peering arrangements have in many instances been adopted blindly; peering has come to be seen as an end in itself, driving the economic imperatives.

Fundamental economic problems have arisen as a result of blindly adopting SKA peering. The SKA peering model has allowed networks to develop rapidly. However, the model provides no real platform for organic growth. Ongoing investment in broadband capacity is therefore dependent on the development of new interconnection models that provide incentives for investment in infrastructure.

Internet backbone providers are now looking to financial settlement models which allow Internet backbone providers to enter into interconnection arrangements without losing the ability to be fairly compensated for their infrastructure costs. The arrangements have the potential to enhance Internet connectivity and to provide an optimal level of interconnection in the long term.

In effect, we are moving towards a tiered pricing structure.

In the future, in the trend toward settlements-based interconnection arrangements, we will see opportunities for Internet backbone providers to derive increased revenues where they are able to attract popular content to their networks. However, the impact of content on the value of the interconnection services provided is not without its problems, given that Internet content varies enormously in terms of its usefulness, popularity and ultimate value.