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I understand that the reason we pay the ISPs is to rent the equipment used to connect with the rest of the world us such as the optic fibers, the cellular towers, the satellites. However, if I want to create my own ISP for myself, meaning that I buy the necessary equipment:

  1. do I need to talk to all the servers in the world to get their server as part of my network (Facebook, Google, Hostgator, ...)
  2. Or there is already a central point where everyone already agreed to connect to so that new ISP can just plug their equipment into that central point and get the World Wide Web for free?
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  • The Internet is ISPs connecting to ISPs, and they often charge each other for the privilege, in much the same way that they charge other customers.
    – Ron Maupin
    Jul 7 '17 at 17:17
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Most ISPs have to buy service from other ISPs to be able to reach every part of the internet. That is called "transit". If you start a small ISP you usually buy transit from one or more bigger ISPs. They will have connectivity to the whole internet, and they will sell that connectivity to you.

You can also set up direct connections to other networks. This is called "peering". Usually those are the networks you exchange a lot of traffic with. Paying a transit provider for the packets you exchange can be a waste of money if you can easily connect directly to the other network and cut out the middle man. Sometimes other networks want you to pay them to set up a direct connection, but in many cases the peering if settlement-free.

The problem with setting up direct connections is the number of network interfaces you need, pulling cables between routers etc. Because of that there are "Internet Exchanges" (IX). An IX is basically a large switch (large IXes are more complex, but from the outside they function as a large switch) that many internet providers and enterprises connect to. That way they can all talk to each other, if they want to. One connection to an IX can let you set up direct peering with hundreds of networks.

As you can see there is a reason you pay your ISP. They invest in routers, connections, and very likely pay larger ISPs to transport part of their traffic. You could set all of that up for yourself, but be prepared to invest tens of thousands of dollars/euros/etc for equipment and connections. And then you'll probably pay more than you pay your current ISP for the transit costs, as you won't be able to negotiate lower prices for buying in bulk.

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You can peer with other ISPs to become an active part of the Internet - that starts as soon as you have at least two peerings and forward data between them. This will usually cost you money when you're small and earn money when you're large.

Another way is to connect to a larger Internet exchange (IX) where you simultaneously peer with a large number of other ISPs.

The Internet has no "central point", it consists of small and large, interconnected networks.

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It is impractical for every ISP to connect directly to every other ISP. It's also rather impractical to have one central point of interconnection, noone likes it when local traffic crosses the ocean twice.

Relationships between ISPs (and other networks that have an AS number and participate in internet routing) can be broadly divided into two categories (yes there do exist intermediate cases). One is "peering", ISP A and ISP B will interconnect with each other so that ISP A and their customers get access to ISP B and their customers. This is not transitive though, if ISP B has peering relationships with ISPs A and C then C does not get a path to A. Peering is usually but not always "settlement free", that is neither provider pays the other for the interconnection (though someone has to pay for the physical link between them).

Peering may be established over either a direct link between the providers or over an exchange point. The exchange point provides a connection fabric (usually presented as an Ethernet network) allowing lots of providers to peer with each other without the cost of dedicated links.

The other is "transit", the transit provider provides the transit customer with access to the internet in general. They will obviously charge for this service.

Most ISPs buy transit from other ISPs, there are serveral reasons for this.

  1. Large ISPs usually won't peer with smaller ones (at least not for free), because they see the relationship as having more benefit to the small ISP than to the large one.
  2. There are a heck of a lot of ISPs in the world.
  3. There are also a heck of a lot of interconnection locations. Smaller ISPs will not want to build out their networks to distant locations.

At the top of the pile are a small number of ISPs who do not buy transit from anyone and rely entirely on peering to reach each other. These are known as transit free or "teir 1"*

* The traditional definition of teir 1 also required the absense of settlement free peering, but it's impossible to determine from the outside if peering is settlment free or not.

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