In a brief announcement Level 3 Communications revealed that it has reached a multi-year interconnection agreement with Google. The agreement is settlement free and is centred around the concept of a bit-mile balance. Effectively this means that the traffic calculation on each network is based on the formula of packet size x distance travelled.
This means that Level 3 is likely to be carrying more traffic long distance for Google. In contrast Level 3 Communications may be taking advantage of Google Fibre as Google looks to expand its reach within metropolitan areas. Google fiber is already located in Austin, Provo and Kansas City and is looking to add six more cities to its network soon.
The second part of the agreement will see additional interconnection locations added to the joint network. This will create greater bonds between the two networks enabling minimal additional latency for traffic carried between points on the two networks. It will also avoid the necessity to utilise a third network partner. Whether this will extend to a larger agreement between the two companies with regards to data centres and the provision of services is yet to be seen though.
Google already has several interconnection agreements in place with other telecommunications companies including Colt, Equinix, Orange business Services, Tata Communications and Verizon. This is a strategy that Google clearly wants to continue and expand in 2016 with Kamran Sistanizadeh, vice president of Network Operations for Google commenting: “Google has and continues to invest into its infrastructure annually, delivering content and services to customers and end-users close to where they are. This infrastructure investment fundamentally enables connections to network providers all over the world, and we welcome more network providers to work with Google to establish similar agreements”
For Level 3 Communications it is harder to perceive their strategy, other than extending their reach into the US metro locations. In itself this is a smart move as it will enable them to service customers at a far lowever cost. Where Google has 10 Gb/s fiber networks already in place it will no longer need to provide additional capacity n these location allowing it to concentrate on its global operations.
For customers this should mean better Internet speeds and for those considering Google cloud services there will be a greater reach and proximity to those services at a lower cost, or at least a lower cost of sale for the vendors. Paul Savill, senior vice president of Core Product Management for Level 3 commented: “Our bit-mile interconnection agreement with Google highlights the importance of all networks – content-based, backbone or last mile – to achieve an equitable arrangement that benefits Internet users worldwide.”
“Our companies look forward to continuing our close working relationship and are committed to providing a secure, scalable, reliable and speedy Internet experience.”
Conclusion
2016 will be an interesting year both for the Network market and for the data centre market with the consolidation within the data centre market looking set to continue. According to Reuters, Verizon are believed to be offering their 48 Terremark data centres for sale as they concentrate on their core business once more.
Interconnection agreements are also on the increase and while Equinix has looked to bring in several companies to help boost its network reach as well as issues its Interconnection Orientated Architecture. In the US Cogent and CenturyLink also announced an agreement late last year and these deals are not likely to slow down. What will be interesting is whether a number of networking companies start to merge as with the data centre companies. As interconnection agreements increase the cost of networking is likely to drop leaving those companies who cannot compete effectively seeking a sale of assets.
This agreement might be insignificant in the scheme of things, but if more and more of these agreements are signed there will be a knock on effect on companies if not later this year then in the coming years that might see consolidation. If Verizon do manage to sell their data centre portfolio it will be interesting to see what they spend the alleged $2.5 billion they will receive on.
