Types of routers

Routers may provide connectivity inside enterprises, between enterprises and the Internet, and inside Internet Service Providers (ISP). The largest routers interconnect ISPs, are used inside ISPs, or may be used in very large enterprise networks. An example of an enterprise router would be the Cisco 7600 . The smallest routers provide connectivity for small and home offices

How ISPs connect to the Internet

Just as their customers pay them for Internet access, ISPs themselves pay upstream ISPs for Internet access. In the simplest case, a single connection is established to an upstream ISP using one of the technologies , and the ISP uses this connection to send or receive any data to or from parts of the Internet beyond its own network; in turn, the upstream ISP uses its own upstream connection, or connections to its other customers (usually other ISPs) to allow the data to travel from source to destination.
In reality, the situation is often more complicated. For example, ISPs with more than one point of presence (PoP) may have separate connections to an upstream ISP at multiple PoPs, or they may be customers of multiple upstream ISPs and have connections to each one at one or more of their PoPs. ISPs may engage in peering, where multiple ISPs interconnect with one another at a peering point or Internet exchange point (IX), allowing the routing of data between their networks, without charging one another for that data - data that would otherwise have passed through their upstream ISPs, incurring charges from the upstream ISP. ISPs that require no upstream and have only customers and/or peers are called Tier 1 ISPs, indicating their status as ISPs at the top of the Internet hierarchy. Routers, switches, Internet routing protocols, and the expertise of network administrators all have a role to play in ensuring that data follows the best available route and that ISPs can "see" one another on the Internet.

Peering

Peering is voluntary interconnection of administratively separate Internet networks for the purpose of exchanging traffic between the customers of each network. The pure definition of peering is settlement-free or "sender keeps all," meaning that neither party pays the other for the exchanged traffic, instead, each derives revenue from its own customers. Marketing and commercial pressures have led to the word peering routinely being used when there is some settlement involved, even though that is not the accurate technical use of the word. The phrase "settlement-free peering" is sometimes used to reflect this reality and unambiguously describe the pure cost-free peering situation.
Peering requires physical interconnection of the networks, an exchange of routing information through the Border Gateway Protocol (BGP) routing protocol and is often accompanied by peering agreements of varying formality, from "handshake" to thick contracts.

Virtual ISP

A Virtual ISP (vISP) purchases services from another ISP (sometimes called a wholesale ISP or similar within this context) that allow the vISP's customers to access the Internet via one or more point of presence (PoPs) that are owned and operated by the wholesale ISP. There are various models for the delivery of this type of service; for example, the wholesale ISP could provide network access to end users via its dial-up modem PoPs or DSLAMs installed in telephone exchanges, and route, switch, and/or tunnel the end user traffic to the vISP's network, whereupon they may route the traffic toward its destination. In another model, the vISP does not route any end user traffic, and needs only provide AAA (Authentication, Authorization and Accounting) functions, as well as any "value-add" services like email or web hosting. Any given ISP may use their own PoPs to deliver one service, and use a vISP model to deliver another service, or, use a combination to deliver a service in different areas. The service provided by a wholesale ISP in a vISP model is distinct from that of an upstream ISP, even though in some cases, they may both be one and the same company. The former provides connectivity from the end user's premises to the Internet or to the end user's ISP, the latter provides connectivity from the end user's ISP to all or parts of the rest of the Internet.
A vISP can also refer to a completely automated white label service offered to anyone at no cost or for a minimal set-up fee. The actual ISP providing the service generates revenue from the calls and may also share a percentage of that revenue with the owner of the vISP. All technical aspects are dealt with leaving the owner of vISP with the task of promoting the service. This sort of service is however declining due to the popularity of unmetered internet access also known as flatrate.