Innovations in the Internet’s Architecture that Challenge the Status Quo

Abstract:     
The current debate over broadband policy has largely overlooked a number of changes to the architecture of the Internet that have caused the price paid by and quality of service received by traffic traveling across the Internet to vary widely. Topological innovations, such as private peering, multihoming, secondary peering, server farms, and content delivery networks, have caused the Internet’s traditionally hierarchical architecture to be replaced by one that is more heterogeneous. Moreover, network providers have begun to employ an increasingly varied array of business arrangements. Some of these innovations are responses to the growing importance of peer-to-peer technologies. Others, such as paid peering and partial transit, are driven by the growing dominance of advertising-based business models as well as the insights provided by the economics of two-sided markets. At times interpreted as network providers’ attempts to promote their self interest at the expense of the public, these changes often reflect network providers’ attempts to reduce cost, manage congestion, and maintain quality of service. As such, they have the potential to yield substantial benefits both to individual consumers and to society as a whole.

Number of Pages in PDF File: 22

Keywords: broadband policy, Internet topology, private peering, multihoming, secondary peering, server farms, content delivery networks, peer-to-peer technology, paid peering, partial transit, two-sided markets, Internet advertising, congestion, quality of service, net neutrality

JEL Classification: K23, L51, L86, L96, L98

Accepted Paper Series