[...] say your MCI and you have a smaller provider that wants to peer with you, you had rather have them buy a pipe than let the peer and ride your network for free. It's all about market share, plain and simple.
That's the conventional thinking. (I won't say "conventional wisdom" since this is not a wise practice.) The trouble with this is called the Sherman Act, which has a provision for something like "collusion in restraint of trade." I'm not pointing at MCI -- I have no idea whether they have ever thought as you ascribed above. But in your example, MCI does not know who the nonpeer will ultimately buy transit from -- all it knows is that if MCI refuses to peer, the nonpeer will have to buy transit from someone who *does* peer with MCI. If reasonable suspicion can be raised that this is occurring, then everybody in the "first tier" peering club can be investigated by the feds. This isn't a "big" deal, Microsoft has been investigated by the feds and they're still in business. In fact, it didn't even hurt their reputation, let alone their bottom line. When the big nets started demanding private peering and refusing to peer with little guys, I had to just shrug and think, "well, they are now big enough that they do not fear gov't intervention." On the other hand the industry will end up regulated due in part to practices like these. And I received some mail (due to my NIC registrations for past customers) a few weeks ago inviting my ex-customer to join a class action lawsuit against a couple of "first tier peering club" members, that was all about this kind of squeezing. We really do just need to send eachother local-region routes, which keeps local traffic local, does not give away wide area telecom to noncustomers, takes away some causes for lawsuits and new legislation, and moves us back to a level playing field where folks without wide area networks have to buy transit and do so without complaining.