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The Economics of the Internet Backbone

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Author Info
Nicholas Economides () (Stern School of Business, NYU)

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Abstract

This paper discusses the economics of the Internet backbone. I discuss competition on the Internet backbone as well as relevant competition policy issues. In particular, I show how public protocols, ease of entry, very fast network expansion, connections by the same Internet Service Provider (“ISP”) to multiple backbones (ISP multi-homing), and connections by the same large web site to multiple ISPs (customer multi-homing) enhance price competition and make it very unlikely that any firm providing Internet backbone connectivity would find it profitable to degrade or sever interconnection with other backbones in an attempt to monopolize the Internet backbone.

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File URL: http://www.netinst.org/ECONOMICS_OF_THE_INTERNET_BACKBONE.pdf
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Publisher Info
Paper provided by NET Institute in its series Working Papers with number 04-23.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length: 57 pages
Date of creation: Oct 2004
Date of revision: Oct 2004
Handle: RePEc:net:wpaper:0423

Contact details of provider:
Web page: http://www.NETinst.org/

For technical questions regarding this item, or to correct its listing, contact: (Nicholas Economides).

Related research
Keywords: Internet; network effects; Internet backbone; competition; monopoly; MCI; WorldCom;

Other versions of this item:

Find related papers by JEL classification:
L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
C63 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - Computational Techniques
D42 - Microeconomics - - Market Structure and Pricing - - - Monopoly
D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection

This paper has been announced in the following NEP Reports:

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.:
  1. Crémer, Jacques & Rey, Patrick & Tirole, Jean, 1999. "Connectivity in the Commercial Internet," IDEI Working Papers 87, Institut d'Économie Industrielle (IDEI), Toulouse, revised 2000. [Downloadable!]
    Other versions:
  2. Joseph Farrell & Garth Saloner, 1985. "Standardization, Compatibility, and Innovation," RAND Journal of Economics, The RAND Corporation, vol. 16(1), pages 70-83, Spring. [Downloadable!] (restricted)
    Other versions:
  3. Jean-Jacques Laffont & Jean Tirole, 2001. "Competition in Telecommunications," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262621509.
  4. 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)
  5. Michael Carter & Julian Wright, 1999. "Interconnection in Network Industries," Review of Industrial Organization, Springer, vol. 14(1), pages 1-25, February. [Downloadable!] (restricted)
  6. Liebowitz, S J & Margolis, Stephen E, 1994. "Network Externality: An Uncommon Tragedy," Journal of Economic Perspectives, American Economic Association, vol. 8(2), pages 133-50, Spring. [Downloadable!] (restricted)
  7. Nicholas Economides & Giuseppe Lopomo & Glenn Woroch, 1997. "Regulatory Pricing Policies to Neutralize Network Dominance," Industrial Organization 9612003, EconWPA. [Downloadable!]
  8. Economides, Nicholas, 1996. "The economics of networks," International Journal of Industrial Organization, Elsevier, vol. 14(6), pages 673-699, October. [Downloadable!] (restricted)
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  9. Economides, Nicholas, 1989. "Desirability of Compatibility in the Absence of Network Externalities," American Economic Review, American Economic Association, vol. 79(5), pages 1165-81, December. [Downloadable!] (restricted)
  10. Armstrong, Mark, 1998. "Network Interconnection in Telecommunications," Economic Journal, Royal Economic Society, vol. 108(448), pages 545-64, May. [Downloadable!] (restricted)
  11. Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, vol. 75(3), pages 424-40, June. [Downloadable!] (restricted)
  12. Economides, Nicholas, 1996. "Network externalities, complementarities, and invitations to enter," European Journal of Political Economy, Elsevier, vol. 12(2), pages 211-233, September. [Downloadable!] (restricted)
    Other versions:
  13. Nicholas Economides, 1999. "Real Options and the Costs of the Local Telecommunications Network," Working Papers 99-11, New York University, Leonard N. Stern School of Business, Department of Economics. [Downloadable!]
  14. Nicholas Economides, 2004. "Competition Policy In Network Industries: An Introduction," Working Papers 04-24, NET Institute, revised Jun 2004. [Downloadable!]
    Other versions:
Full references

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.)

  1. 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!]
  2. Nicholas Economides, 2007. "The Economics of the Internet," Working Papers 07-01, NET Institute, revised Jan 2007. [Downloadable!]
  3. Nicholas Economides, 2007. "Economics of the Internet," Working Papers 07-1, New York University, Leonard N. Stern School of Business, Department of Economics. [Downloadable!]
  4. Østein Foros & Hans Kind & Lars Søard, 2006. "Strategic Regulation Policy in the Internet," Journal of Regulatory Economics, Springer, vol. 30(1), pages 63-84, 07. [Downloadable!] (restricted)
  5. Ke-Wei Huang & Arun Sundararajan, 2006. "Pricing Digital Goods: Discontinuous Costs and Shared Infrastructure," Working Papers 06-11, NET Institute, revised Sep 2006. [Downloadable!]
  6. Nicholas Economides, 2006. "Public Policy in Network Industries," Working Papers 06-17, New York University, Leonard N. Stern School of Business, Department of Economics. [Downloadable!]
    Other versions:
  7. Christiaan Hogendorn, 2006. "Excessive(?) Entry of National Telecom Networks, 1990-2001," Wesleyan Economics Working Papers 2006-001, Wesleyan University, Department of Economics. [Downloadable!]
    Other versions:
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