A gigabit ethernet switch port in even the most expensive scenario I can think of would be about $1000. In 1996 it was all FDDI and HSSI ports, which were an or

A gigabit ethernet switch port in even the most expensive scenario I can think of would be about $1000. In 1996 it was all FDDI and HSSI ports, which were an order of magnitude more expensive than GigE equipment is these days. There is very much a precedent for the scenario you describe: Comcast has direct peering agreements with Google. While I can't presume to know if it's settlement-free, I'm almost certain it is. Google's business model, especially YouTube, depends on it. Your conclusion is a little off kilter. Peering is cheap because they do these types of interconnects in these carrier hotels, and as we all know, running a Cat5 cable through a building is cheap. However, space in these carrier hotels is absurdly expensive because of the demand. This is fine if you just have a few racks of equipment and ship all the packets out over WAN links to your datacenters, which is pretty much the status quo. Not just any average joe is going to be able to setup shop in these places. YC companies pay for bandwidth because it's cheaper to do that then it is to build out a network. It's the same reason they don't build datacenters, own office space, etc. Most don't even own or operate dedicated servers anymore. Peering works at certain levels of network scale, but below that, somewhat pointless from a business/financial perspective. Check out SoftLayer's peering page: http://www.softlayer.com/network/peering http://www.softlayer.com/network/peering If peering was as expensive and as uncommon as Comcast claims, why would SoftLayer need a special page for it?