What are peering and transit?
The two ways networks connect to each other — and the distinction is essentially who pays whom.
The internet is a network of networks. No single organisation runs it. Around a hundred thousand independent networks, each identified by an autonomous system number (ASN), interconnect voluntarily. For your traffic to reach a website, a chain of these networks must be willing to carry it.
Transit. You pay another network to carry your traffic to everywhere on the internet. The provider is selling reachability — full routes to all destinations. This is what a small ISP buys from a larger one, and it is billed by bandwidth, typically on a 95th percentile measure that discards the busiest 5% of samples.
Peering. Two networks agree to exchange traffic directly between their own customers, usually without payment — settlement-free peering. Neither carries the other's traffic onward to third parties; the deal covers only what each network's own users send to the other's.
Why peer at all? Both sides save transit costs, the path is shorter so latency falls, and neither depends on a third party for that traffic. It is rational when the traffic volumes are roughly balanced and both benefit similarly.
Where peering gets contentious. If one network sends far more than it receives — a large video service sending to a consumer ISP, for example — the receiving network may argue it is bearing more cost and demand payment, creating paid peering. Disputes have produced visible congestion for end users while commercial negotiations dragged on, which is one of the few times this normally invisible layer surfaces publicly.
Internet exchange points (IXPs) are the physical places this happens — a shared switching fabric in a data centre where hundreds of networks connect once and can then peer with many others cheaply. LINX in London and AMS-IX in Amsterdam are among the largest.
Why it matters to you: a well-peered ISP delivers better latency to the services you use, and peering arrangements — not raw line speed — frequently explain why one provider feels faster than another.