settlementfree

Settlementfree (settlement-free interconnection) is a term used in Internet infrastructure to describe an arrangement in which two networks exchange traffic without monetary settlement. The most common form is settlement-free peering, where networks connect at an Internet Exchange Point or via direct interconnection and agree not to pay each other for the traffic they hand off between them.

In exchange, each party expects benefits such as lower transit costs and improved performance for its customers. The absence of payments is conditional; many agreements include practical constraints, such as requiring roughly balanced traffic or maintaining stable routing announcements, to avoid abuse of the arrangement.

Practical deployment: SF peering is prevalent among large, content-rich networks and Internet service providers at IXPs; it is less common when traffic is highly unbalanced, and networks may switch to paid peering or buy transit if traffic patterns shift.

Limitations and disputes: While settlement-free peering reduces direct costs, it can lead to tensions if one network's traffic grows disproportionately. Because terms are often private, public visibility is limited; disputes are typically resolved through renegotiation or changes in peering arrangements.

See also: paid peering, Internet Exchange Point, network interconnection, transit.