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Internet Peering as a Network of Relations

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Author Info
Steffen Lippert (Massey University, Department of Commerce, PB 102 904, NSMC, Auckland, New Zealand. Tel. +64 9 414 0800 Ext. 9283. s.lippert@massey.ac.nz)
Giancarlo Spagnolo (Stockholm School of Economics, Department of Economics, P.O. Box 6501, SE–113 83 Stockholm, Sweden, and Consip Research Unit, Via Isonzo, 19/E, I–00198 Rome, Italy. Tel +39 320 431 2186. giancaspagnolo@yahoo.com)

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Abstract

We apply results from recent theoretical work on networks of relations to analyze optimal peering strategies for asymmetric ISPs. It is shown that - 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. We also explain why bilateral monetary transfers between asymmetric ISPs (Bilateral Paid Peering), though potentially good for bilateral peering, may have rather negative effects on the sustainability of the overall peering network.

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Publisher Info
Paper provided by SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich in its series Discussion Papers with number 191.

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Date of creation: Nov 2006
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Handle: RePEc:trf:wpaper:191

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References listed on IDEAS
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  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!]
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  2. LAFFONT, Jean-Jacques & MARCUS, Scott & REY, Patrick & TIROLE, Jean, 2001. "Internet Interconnection and the Off-Net-Cost Pricing Principle," IDEI Working Papers 130, Institut d'Économie Industrielle (IDEI), Toulouse. [Downloadable!]
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  3. Stanley Besen et al., 2001. "Advances in Routing Technologies and Internet Peering Agreements," American Economic Review, American Economic Association, vol. 91(2), pages 292-296, May. [Downloadable!] (restricted)
  4. Thorsten Wichmann & Pio Baake, 1998. "On the Economics of Internet Peering," Berlecon Research Papers 0004, Berlecon Research. [Downloadable!]
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  5. Lippert, Steffen & Spagnolo, Giancarlo, 2005. "Networks of Relations and Social Capital," CEPR Discussion Papers 5078, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  6. Jean-Jacques Laffont et al., 2001. "Internet Peering," American Economic Review, American Economic Association, vol. 91(2), pages 287-291, May. [Downloadable!] (restricted)
  7. Abreu, Dilip, 1988. "On the Theory of Infinitely Repeated Games with Discounting," Econometrica, Econometric Society, vol. 56(2), pages 383-96, March. [Downloadable!] (restricted)
  8. Friedman, James W, 1971. "A Non-cooperative Equilibrium for Supergames," Review of Economic Studies, Blackwell Publishing, vol. 38(113), pages 1-12, January. [Downloadable!] (restricted)
  9. Kranton, Rachel E, 1996. "Reciprocal Exchange: A Self-Sustaining System," American Economic Review, American Economic Association, vol. 86(4), pages 830-51, September. [Downloadable!] (restricted)
  10. 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. [Downloadable!]
  11. 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. [Downloadable!]
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