Can "Bill-and-Keep" Peering Be Mutually Beneficial?

We analyze “Bill-and-Keep” peering between two providers, where no money exchanges hands. We assume that each provider incurs costs from its traffic traversing its as well as the peer’s links, and compute the traffic levels in Nash equilibrium. We show that Nash strategies are not blind, i.e., they are neither pure hot-potato nor pure cold-potato strategies. Rather, the Nash strategies involve strategically splitting traffic between a provider’s own links and its peer’s. We derive necessary and sufficient conditions for both the providers to be better (or worse) off in Nash equilibrium compared to the blind strategies. We also analyze society’s performance as a whole and derive necessary and sufficient conditions for the society to be better (or worse) off. In particular we establish that, under Bill-and-Keep peering, while it is not possible for two asymmetric providers to be both worse off, it is certainly possible for both to be better off.