Interconnection, Differentiation and Bottlenecks in the Internet
AbstractIn 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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Bibliographic InfoPaper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 0011.
Date of creation: Nov 2000
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Web page: http://www.econ.cam.ac.uk/index.htm
Access Pricing; Internet; Network Industries; Interconnection;
Other versions of this item:
- Giovannetti, Emanuele, 2002. "Interconnection, differentiation and bottlenecks in the Internet," Information Economics and Policy, Elsevier, vol. 14(3), pages 385-404, September.
- 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
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