Overlay network

An overlay network is a computer network that is built on top of another network. Nodes in the overlay network can be thought of as being connected by virtual or logical links, each of which corresponds to a path, perhaps through many physical links, in the underlying network. For example, distributed systems such as peer-to-peer networks and client-server applications are overlay networks because their nodes run on top of the Internet. The Internet was originally built as an overlay upon the telephone network, while today (through the advent of VoIP), the telephone network is increasingly turning into an overlay network built on top of the Internet.

Overlay networks are used in telecommunication because of the availability of digital circuit switching equipment and optical fiber. Telecommunication transport networks and IP networks (which combined make up the broader Internet) are all overlaid with at least an optical fiber layer, a transport layer and an IP or circuit switching layers (in the case of the PSTN).

Enterprise private networks were first overlaid on telecommunication networks such as frame relay and Asynchronous Transfer Mode packet switching infrastructures but migration from these (now legacy) infrastructures to IP based networks and virtual private networks started (2001~2002).

From a physical standpoint overlay networks are quite complex (see Figure 1) as they combine various logical layers that are operated and built by various entities (businesses, universities, government etc.) but they allow separation of concerns that over time permitted the buildup of a broad set of services that could not have been proposed by a single telecommunication operator (ranging from broadband Internet access, voice over IP or IPTV, competitive telecom operators etc.).

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