Interconnection and Competition Among Asymmetric Networks in the Internet Backbone Market

Posted: 9 May 2008

See all articles by Eric Jahn

Eric Jahn

Goethe University, Frankfurt

Jens Prufer

Tilburg University; Tilburg University - Department of Economics; Tilburg University - Law and Economics Center (TILEC)

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Abstract

We examine the interrelation between interconnection and competition in the Internet backbone market. Networks that are asymmetric in size choose among different interconnection regimes and compete for end-users. We show that a direct interconnection regime, peering, softens competition as compared to indirect interconnection since asymmetries become less influential when networks peer. If interconnection fees are paid, the smaller network pays the larger one. Suffiently symmetric networks enter a Peering agreement while others use an intermediary network for exchanging traffic. This is in line with considerations of a non-U.S. policy maker. In contrast, U.S. policy makers prefer that relatively asymmetric networks peer.

Keywords: Internet Backbone, Endogenous Network Interconnection, Asymmetric Networks, Two-Way Access Pricing

JEL Classification: L10, L96, D43

Suggested Citation

Jahn, Eric and Prufer, Jens, Interconnection and Competition Among Asymmetric Networks in the Internet Backbone Market. Information Economics and Policy, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1131151

Eric Jahn

Goethe University, Frankfurt ( email )

60054 Frankfurt
Germany

Jens Prufer (Contact Author)

Tilburg University ( email )

P.O. Box 90153
Tilburg, DC Noord-Brabant 5000 LE
Netherlands

Tilburg University - Department of Economics ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Tilburg University - Law and Economics Center (TILEC) ( email )

Warandelaan 2
Tilburg, 5000 LE
Netherlands

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