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The Economics of the Internet Backbone

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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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  • Nicholas Economides, 2004. "The Economics of the Internet Backbone," Working Papers 04-23, NET Institute, revised Oct 2004.
    • Handle: RePEc:net:wpaper:0423
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    File URL: http://www.netinst.org/ECONOMICS_OF_THE_INTERNET_BACKBONE.pdf
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    Cited by:

    1. Doh‐Shin Jeon & Domenico Menicucci, 2011. "Interconnection among academic journal websites: multilateral versus bilateral interconnection," RAND Journal of Economics, RAND Corporation, vol. 42(2), pages 363-386, June.
    2. Østein Foros & Hans Kind & Lars Søard, 2006. "Strategic Regulation Policy in the Internet," Journal of Regulatory Economics, Springer, vol. 30(1), pages 63-84, July.
    3. Christiaan Hogendorn, 2003. "Excessive(?) Entry of National Telecom Networks, 1990-2001," Working Papers 03-07, NET Institute.

    More about this item

    Keywords

    Internet; network effects; Internet backbone; competition; monopoly; MCI; WorldCom;
    All these keywords.

    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; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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