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Internet infrastructure and competition in digital markets

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  • Hanspach, Philip

Abstract

Large digital platform companies increasingly integrate vertically by building Internet infrastructure, such as edge computing facilities, content delivery networks, or submarine cables. These investments enable new services while changing their bargaining power towards the upstream supplier. I model competing investment incentives in Internet infrastructure for an upstream player (e.g., an Internet Service Provider) and a large downstream platform and its effects on competition with smaller downstream platforms without proprietary infrastructure. Investment incentives increase discontinuously both upstream and downstream when the downstream platform has the larger network. With symmetric investment costs, the downstream platform will invest more than a pure upstream player. I discuss the model implications for net neutrality, network access regulation, and efficient side payments between platform and upstream industry.

Suggested Citation

  • Hanspach, Philip, 2022. "Internet infrastructure and competition in digital markets," 31st European Regional ITS Conference, Gothenburg 2022: Reining in Digital Platforms? Challenging monopolies, promoting competition and developing regulatory regimes 265633, International Telecommunications Society (ITS).
    • Handle: RePEc:zbw:itse22:265633
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    References listed on IDEAS

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    1. Dawoon Jung & Byung Cho Kim & Myungsub Park & Detmar W. Straub, 2019. "Innovation and Policy Support for Two-Sided Market Platforms: Can Government Policy Makers and Executives Optimize Both Societal Value and Profits?," Information Systems Research, INFORMS, vol. 30(3), pages 1037-1050, September.
    2. Shane Greenstein & Martin Peitz & Tommaso Valletti, 2016. "Net Neutrality: A Fast Lane to Understanding the Trade-Offs," Journal of Economic Perspectives, American Economic Association, vol. 30(2), pages 127-150, Spring.
    3. Chaturvedi, Rakesh & Dutta, Souvik & Kanjilal, Kiriti, 2021. "An economic model of the last-mile internet," Journal of Economic Behavior & Organization, Elsevier, vol. 191(C), pages 620-638.
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    More about this item

    Keywords

    platforms; multi-sided markets; competition policy; net neutrality; Internet; telecommunications infrastructure;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L63 - Industrial Organization - - Industry Studies: Manufacturing - - - Microelectronics; Computers; Communications Equipment
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software

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