What is Transit?

Transit is a business and technical arrangement in which an Internet Service Provider (ISP) or other network operator purchases upstream connectivity from a larger network in order to reach every publicly routable prefix on the Internet. The upstream provider agrees to advertise the customer's IP prefixes to its BGP peers and to forward traffic from the customer to any destination, effectively providing a full default-free zone (DFZ) routing table. This is distinct from peering, where two networks exchange traffic for free because they both benefit from the exchange.

In practice, a transit customer usually connects to the transit provider via a physical port or a VLAN, runs BGP, and receives a default route or a full BGP table (often 1M+ routes). The transit provider announces the customer's prefixes to the rest of the Internet. The customer pays based on either committed port speed (e.g., a 10 Gbps port) or 95th percentile usage, measured over a monthly billing cycle. Transit is the primary way smaller networks gain universal reachability without having to negotiate hundreds of individual peering agreements.

Transit sits at the top of the network hierarchy. Tier 1 networks (like NTT, CenturyLink, or Telia) only sell transit; they never buy it because they can reach the entire Internet without paying a transit fee. Tier 2 networks both sell transit to smaller networks and buy transit from Tier 1 providers. Tier 3 access networks typically buy transit only. The economics of transit have changed dramatically since the 1990s: prices have fallen by orders of magnitude due to deregulation, undersea cable investment, and the rise of large content delivery networks like Google and Netflix that force transit providers to upgrade internal capacity.