Dark Clouds over the Internet?

Abstract:     
Currently, the Internet is characterised by excess capacity which benefits consumers and producers alike. High quality and declining prices of interconnection are the basis for many e-commerce, software and equipment businesses. However, tough competition in the Internet backbone market driving these developments could ruin network operators and, hence, threaten other markets, too. We pursue the idea of the Internet backbone market's decline with standard economic theory. We offer several scenarios and discuss potential market based and policy based remedies. We find that due to a phenomenon we call capacity paradox the industry's future development is overshadowed by "dark clouds".

Number of Pages in PDF File: 13

Keywords: Internet Backbone Market

JEL Classification: D4, L1, L5, L96

working papers series