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Tier 1 Internet Service Provider (Tier 1 ISP)

Tier 1 internet service provider (Tier 1 ISP) is an entity that has access to an entire Internet region (tier 1 line) through some free peering understanding. The tier1 ISP does not pay any transiting fee to reach any internet region and all the information exchanged is done reciprocally.  A tier 1 ISP is rated as the highest with its own IP network in a particular region and connects with the highest tier 1 ISP provider in the same or different region. The Tier 1 ISP sells the bandwidth to smaller ISPs generally referred to Tier 2 and tier 3 ISPs (independent units) that in turn sell the bandwidth to individuals and businesses.
The tier 1 ISP has large traffic volumes, huge customer base, large routes and many independent units inside its network. The provider offers strong SLAS and has a good control over the network infrastructure like routers, switches etc. to connect to their other ISPs via peering agreements. They receive and deliver packets from customers and from the other tier 1 ISPs throughout the globe. Global tier 1 ISPs have their own internet backbone with international tier 1 ISPs. They do not pay for their traffic in the region.

The major points of difference between tier 1 ISP and tier 2 ISP are the tier 1 ISPs do not pay for the traffic on the agreed lines. They have multiple peering agreements. They either have their own fiber optic transport or take it on the lease. They sell the bandwidth but will never buy the service from a tier 3 ISP.

In other words, tier 1 ISPs have their own internet backbone in a region and peering contracts with other similar tier 1 providers in a mutually agreed free relationship. They in turn sell the line 1 to the tier 2 ISP who again sell it to their customers. Tier 3 ISPs are smaller location based entities. 

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