The old internet world of collaboration and the new world of commercial imperatives look set to collide as the peering row between TelstraClear and Auckland-ISP ICONZ continues.
The largest carrier of traffic in New Zealand, Telecom, does have peering arrangements in place with smaller ISPs throughout New Zealand, but Chris Thompson, Telecom's head of internet and online marketing, says the market is maturing to the point where commercial agreements are a necessity.
"Free is a good philosophy until you realise you have to build extra network capacity to cope with it, then it becomes a problem."
Thompson also uses a different terminology to describe peering.
"It's a much abused term. Peering really only happens between companies of a similar size. What we're talking about is interconnection."
Thompson says when Telecom is dealing with ISPs that are vastly smaller or are trafficking in far less traffic it generally has a separate agreement in place with them to govern interconnection costs.
"It's to avoid the situation where you have a company in, for example, Wellington that wants to send a lot of data to Auckland and want to peer with us in Wellington to do it. We'd end up carrying all that data to Auckland for nothing. We would prefer they peer in Auckland in that instance."
Thompson says over time as the amount of traffic has increased between ISPs and carriers the need for a commercial arrangement is becoming more commonplace.
"Carriers have to manage those commercial and technical risks more closely."
Thompson points to overseas markets where interconnection and peering are well-established practices.
"If you look at the US, the likes of WorldCom ... peer with each other, but they charge smaller players for interconnection."
Thompson says when carriers are transferring traffic each way "to within a few percent" of each other it makes more sense to simply stop billing the other carrier for what will, in effect, be the same amount in return.
"They simply ended up swapping invoices."
The Australian Competition and Consumer Commission has received numerous complaints about peering and interconnection agreements and is now investigating whether peering only between the so-called Tier 1 telcos, namely the largest, is anti-competitive.
According to the ACCC report into the issue: "Throughout 2002, however, the Commission received complaints from ISPs who were excluded from the domestic peering agreements. Generally, the complaints concerned the fact that none of the Tier 1 service providers paid for use of the complainants' networks for data transmission yet the complainants were required to pay fees to use the Tier 1s' networks".
The commission is seeking further comment from the industry before reaching a decision later this year.
In New Zealand ICONZ has called on the Commerce Commission to investigate peering and a preliminary investigation under the terms of the Commerce Act has begun. The Telecommunications Commissioner has also been ruling on interconnection agreements under the Telecommunications Act and an application for determination from that division may be required for the issue to be sorted out.