A dispute between two of the Internet's biggest service providers has exploded into the public arena after a large number of business and consumer customers saw their Net use curtailed.

The first customers knew of the dispute was on Wednesday morning, when ISP Level 3 terminated its peering agreement with Cogent. The loss of this direct link meant that a portion of each network's users could not contact anything hosted on the other network, including websites, other types of servers and e-mail addresses.

Among others, the Level 3 decision affected users of Road Runner, the US cable broadband service run by Time Warner.

The dispute is over peering agreements, a type of direct connection agreed by two networks who exchange roughly the same amount of traffic and want to guarantee access for their users to the other network's content. The biggest "tier 1" ISPs - such as Sprint, UUNet, AT&T and Level 3 - connect to all the other major networks via peering agreements, and don't pay transit fees to anyone else.

Cogent argues it is at least as big as Level 3, which would ordinarily be enough reason for the two ISPs to maintain a peering arrangement. The problem, from Level 3's point of view, is that Cogent passes significantly more traffic to Level 3's network than Level 3 to Cogent.

That's because Cogent specialises in cheap bandwidth, which has attracted a large number of high-traffic websites. Level 3 essentially wants Cogent to pay for the extra traffic passed to Level 3's network and says its former arrangement with Cogent is no longer financially viable.

"They asked us if we wanted to become a customer of theirs, but considering that we're larger than them, that doesn't make a whole lot of sense," said Cogent chief executive David Schaeffer. He denied that traffic exchange was disproportionate, saying traffic was "basically balanced".

Cogent contends the move is a strong-arm tactic by Level 3 to force Cogent to pay for its transit arrangements, and ultimately to raise its prices for bandwidth. The move is a "desperate attempt to raise revenue in order to service its massive debt and to coerce Cogent to increase our prices," Cogent said in a statement.

The resulting dispute is affecting customers on either network who are "single homed", or only have a connection to a single network. Cogent said it would give single-homed Level 3 customers that were offered free Internet transit for a year if they switched to Cogent's network. Larger ISP customers usually have connections to several network providers, and aren't affected.

Industry observers said the situation is a contest to see who will blink first. Level 3 no longer wants to peer with Cogent, though its customers need access to Cogent's content. Cogent doesn't want to pay for transit - and if it does agree to pay transit fees, there is a possibility that its other peers may start asking for them too.

Service will be inadequate for several thousand of each companies' customers until they come to an agreement. "Customers who are multi-home will have sub-optimal routing, and the others will vote with their feet. Some will go to us, and some will go somewhere else," said Shaeffer. "The same thing will happen to us, we will lose some single-home customers. But we don't have any choice."

He said Cogent has no intention of buying access from Level 3, while Level 3 says it does not intend to resume its peering agreement.

In early 2003, a similar situation arose when AOL terminated its peering arrangement with Cogent. Part of that dispute, revolved around the fact that Cogent was sending to AOL about three times as much traffic as it received.