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Internet peering as a network of relations

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  • Lippert, Steffen
  • Spagnolo, Giancarlo

Abstract

This paper applies results from recent theoretical work on networks of relations to analyze optimal peering strategies for asymmetric Internet Service Providers (ISPs). From a network of relations perspective, ISPs' asymmetry in bilateral peering agreements need not be a problem, since when these form a closed network, asymmetries are pooled and information transmission is faster. Both these effects reduce the incentives for opportunism in general, and interconnection quality degradation in particular. The paper also explains why bilateral monetary transfers between asymmetric ISPs (Bilateral Paid Peering), though potentially good for bilateral peering, may have negative effects on the sustainability of the overall peering network.

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Bibliographic Info

Article provided by Elsevier in its journal Telecommunications Policy.

Volume (Year): 32 (2008)
Issue (Month): 1 (February)
Pages: 33-49

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Handle: RePEc:eee:telpol:v:32:y:2008:i:1:p:33-49

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Related research

Keywords: Internet Service Provider Internet peering agreements Transit Networks of relations Quality degradation Implicit contracts;

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References

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  1. Kranton, Rachel E, 1996. "Reciprocal Exchange: A Self-Sustaining System," American Economic Review, American Economic Association, vol. 86(4), pages 830-51, September.
  2. Friedman, James W, 1971. "A Non-cooperative Equilibrium for Supergames," Review of Economic Studies, Wiley Blackwell, vol. 38(113), pages 1-12, January.
  3. Crémer, Jacques & Rey, Patrick & Tirole, Jean, 1999. "Connectivity in the Commercial Internet," IDEI Working Papers 87, Institut d'Économie Industrielle (IDEI), Toulouse, revised 2000.
  4. Abreu, Dilip, 1988. "On the Theory of Infinitely Repeated Games with Discounting," Econometrica, Econometric Society, vol. 56(2), pages 383-96, March.
  5. Green, Edward J. & Porter, Robert H., 1982. "Noncooperative Collusion Under Imperfect Price Information," Working Papers 367, California Institute of Technology, Division of the Humanities and Social Sciences.
  6. Stanley Besen, 2001. "Advances in Routing Technologies and Internet Peering Agreements," American Economic Review, American Economic Association, vol. 91(2), pages 292-296, May.
  7. Giovannetti, E. & Ristuccia, C.A., 2003. "Estimating Market Power in the Internet Backbone Using Band-X data," Cambridge Working Papers in Economics 0332, Faculty of Economics, University of Cambridge.
  8. Jean-Jacques Laffont, 2001. "Internet Interconnection and the Off-Net-Cost Pricing Principle," Theory workshop papers 357966000000000085, UCLA Department of Economics.
  9. Matthew O. Jackson, 2003. "A survey of models of network formation: Stability and efficiency," Working Papers 1161, California Institute of Technology, Division of the Humanities and Social Sciences.
  10. Lippert, Steffen & Spagnolo, Giancarlo, 2011. "Networks of relations and Word-of-Mouth Communication," Games and Economic Behavior, Elsevier, vol. 72(1), pages 202-217, May.
  11. Thorsten Wichmann & Pio Baake, 1998. "On the Economics of Internet Peering," Berlecon Research Papers 0004, Berlecon Research.
  12. Giovannetti, E. & Neuhoff, K. & Spagnolo, G., 2005. "Agglomeration in Internet Co-operation Peering Agreements," Cambridge Working Papers in Economics 0505, Faculty of Economics, University of Cambridge.
  13. Jean-Jacques Laffont, 2001. "Internet Peering," American Economic Review, American Economic Association, vol. 91(2), pages 287-291, May.
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Cited by:
  1. Lippert, Steffen & Spagnolo, Giancarlo, 2005. "Networks of Relations and Social Capital," CEPR Discussion Papers 5078, C.E.P.R. Discussion Papers.
  2. Besen, Stanley M. & Israel, Mark A., 2013. "The evolution of Internet interconnection from hierarchy to “Mesh”: Implications for government regulation," Information Economics and Policy, Elsevier, vol. 25(4), pages 235-245.
  3. López, Ángel Luis, 2011. "Asymmetric access pricing in the Internet backbone market," Economics Letters, Elsevier, vol. 112(1), pages 3-6, July.
  4. Foros, Øystein & Kind, Hans Jarle & Sand, Jan Yngve, 2009. "Entry may increase network providers' profit," Telecommunications Policy, Elsevier, vol. 33(9), pages 486-494, October.
  5. D’Ignazio, Alessio & Giovannetti, Emanuele, 2014. "Continental differences in the clusters of integration: Empirical evidence from the digital commodities global supply chain networks," International Journal of Production Economics, Elsevier, vol. 147(PB), pages 486-497.

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