Interconnection, Differentiation and Bottlenecks in the Internet

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Interconnection, Differentiation and Bottlenecks in the Internet

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Giovannetti, E.

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Emanuele Giovannetti

Abstract

In the Internet information packets are routed through many vertically related hops. However these network hierarchies are not fixed. Two providers can be simultaneously vertically related in a routing process as supplier and retailer, while horizontally competing in another. We study pricing and interconnection decisions when ISPs become interconnected into a wider network. We find that interconnection lowers retail and access prices when the downstream industry is poorly differentiated. The profitability of interconnection also depends on the differentiation of the retail sector. Interconnection is, however, universally agreed upon for an intermediate range of retail services differentiation values.

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Paper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 0011.

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Date of creation: Nov 2000
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Handle: RePEc:cam:camdae:0011

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Article
- Giovannetti, Emanuele, 2002. "Interconnection, differentiation and bottlenecks in the Internet," Information Economics and Policy, Elsevier, vol. 14(3), pages 385-404, September. [Downloadable!] (restricted)

Find related papers by JEL classification:
L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

Jean-Jacques Laffont & Patrick Rey & Jean Tirole, 1998. "Network Competition: I. Overview and Nondiscriminatory Pricing," RAND Journal of Economics, The RAND Corporation, vol. 29(1), pages 1-37, Spring. [Downloadable!] (restricted)
Armstrong, M., 1996. "Network Interconnection," Discussion Paper Series In Economics And Econometrics 9625, Economics Division, School of Social Sciences, University of Southampton.
Armstrong, Mark & Doyle, Chris & Vickers, John, 1996. "The Access Pricing Problem: A Synthesis," Journal of Industrial Economics, Blackwell Publishing, vol. 44(2), pages 131-50, June. [Downloadable!] (restricted)
Other versions:
- Armstrong, M. & Doyle, C. & Vickers, J., 1995. "The Access Pricing Problem: A Synthesis," Discussion Paper Series In Economics And Econometrics 9532, Economics Division, School of Social Sciences, University of Southampton.
Nicholas S. Economides & Glenn A. Woroch, 1994. "Benefits and Pitfalls of Network Interconnection," Industrial Organization 9411005, EconWPA. [Downloadable!]
Other versions:
- Nicholas S. Economides & Glenn A. Woroch, 1992. "Benefits and Pitfalls of Network Interconnection," Working Papers 92-31, New York University, Leonard N. Stern School of Business, Department of Economics.
Jeffrey K. MacKie-Mason & Hal R. Varian, 1994. "Pricing the Internet," Computational Economics 9401002, EconWPA. [Downloadable!]
Other versions:
- Mackie-Mason, J.K. & Varian, H.R., 1993. "Pricing the Internet," Memorandum 20/1993, Oslo University, Department of Economics.
Valletti, Tommaso M. & Estache, Antonio, 1999. "The theory of access pricing : an overview for infrastructure regulators," Policy Research Working Paper Series 2097, The World Bank. [Downloadable!]
Other versions:
- Estache, Antonio & Valletti, Tommaso, 1999. "The Theory of Access Pricing: an Overview for Infrastructure Regulators," CEPR Discussion Papers 2133, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
Economides, Nicholas, 1998. "The incentive for non-price discrimination by an input monopolist," International Journal of Industrial Organization, Elsevier, vol. 16(3), pages 271-284, May. [Downloadable!] (restricted)
Economides, Nicholas, 1999. "The Telecommunications Act of 1996 and its impact1," Japan and the World Economy, Elsevier, vol. 11(4), pages 455-483, December. [Downloadable!] (restricted)
Other versions:
- Nicholas Economides, 1998. "The Telecommunication Act of 1996 and its Impact," Working Papers 98-08, New York University, Leonard N. Stern School of Business, Department of Economics. [Downloadable!]

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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

D’Ignazio, A. & Giovannetti, E., 2006. "‘Unfair’ Discrimination in Two-sided Peering? Evidence from LINX," Cambridge Working Papers in Economics 0621, Faculty of Economics, University of Cambridge. [Downloadable!]
Jahn, Eric & Pruefer, Jens, 2006. "Interconnection and competition among asymmetric networks in the internet backbone market," Discussion Paper 122, Tilburg University, Center for Economic Research. [Downloadable!]
Other versions:
- Jahn, E. & Prufer, J., 2006. "Interconnection and Competition Among Asymmetric Networks in the Internet Backbone Market," Discussion Paper 2006-033, Tilburg University, Tilburg Law and Economic Center. [Downloadable!]
- Jahn, Eric & Prüfer, Jens, 2008. "Interconnection and competition among asymmetric networks in the Internet backbone market," Information Economics and Policy, Elsevier, vol. 20(3), pages 243-256, September. [Downloadable!] (restricted)
Emanuele Giovannetti, 2005. "Diagonal Mergers and Foreclosure in the Internet," Review of Network Economics, Concept Economics, vol. 4(1), pages 33-62, March. [Downloadable!]
Other versions:
- Emanuele Giovannetti, 2005. "Diagonal Mergers And Foreclosure In The Internet," Working Papers 80, Sapienza University of Rome, Department of Public Economics. [Downloadable!]
D'Ignazio, A. & Giovannetti, E., 2004. "From Exogenous to Endogenous Networks: Internet Applications," Cambridge Working Papers in Economics 0445, Faculty of Economics, University of Cambridge. [Downloadable!]
Giovannetti, E., 2003. "‘How Different is Wireless Access? Implications for Internet Mergers," Cambridge Working Papers in Economics 0307, Faculty of Economics, University of Cambridge. [Downloadable!]

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