> The ISP doesn't pay both sides, but someone pays somewhere. So, if we are talking about the "cost of peering" it doesn't serve to talk about it from only one side.
But we're talking about the cost of peering paid by the ISP, because the ISP doesn't have to cover costs paid by somebody else and no one else is objecting to paying their part of it.
> You can get more than 16 ports in the 5u unit, so rent is probably under-amortized but not by the two order of magnitudes that would make up the difference between my estimate and your original.
Juniper MX240 supports 80 10GbE ports in 5U. Cisco's product search is lame but I expect they have something similar too.
> Peering is not a major cost for ISPs because ISPs don't have a lot of peers. As more services want direct peering relationships, there are some overhead costs which go up to manage the explosion of peering relationships.
That isn't necessarily true either. Only the major transit providers and CDNs like Level 3 and Akamai and the major players like Google that are so big they're effectively their own transit provider/CDN have any interesting peering.
All the smaller players get connected through one of the transit providers, because Joe's Website only wants to hook up from wherever Joe's servers are, not at every carrier hotel in the world like Google does. So they pay a transit provider to handle that and the ISP only has to deal with the transit provider.
The problem comes when the ISPs want to charge major transit providers monopoly rents for peering (which they would have to pass on), or refuse to upgrade the links to them when they're saturated in order to force their big customers (like Netflix at one point) to pay monopoly rents for peering directly.
> My initial objection was that you over-simplified.
It's supposed to be a simplification. The point isn't to make a full accounting, it's to compare orders of magnitude. Even using your numbers with unrealistically conservative assumptions about everything, they're still a single digit percentage of the typical customer's bill.