Without Public Peer: The Potential Regulatory and Universal Service Consequences of Internet Balkanization
42 Pages Posted: 14 Jul 1998
Date Written: June 1998
Since its inception the Internet has generated positive networking externalities, widespread access and seamless connectivity through a combination of TCP/IP routing technologies and widespread network interoperability. During this promotional period, Internet Service Providers ("ISPs") appeared to have a keen interest in collaboration seemingly without concern for profit maximization and without regard for operator size, traffic volume and flow of traffic. ISPs coordinated traffic primarily at quasi-public network access points and exchanges, in much the same was as two local exchange carriers receive and hand off traffic at "Meet Points" to secure wide area call access. Growing service demand, congestion at quasi-public interconnection sites and commercialization of the industry have motivated major ISPs and large volume users to pursue more reliable, quasi-private network interconnection. Private peering arrangements promote security, reliability and higher service quality. They add robustness and new, faster and higher capacity routing options. But on the other hand private peering arrangements help create a hierarchy of networks and users while previously generated positive networking externalities arose from a flat, democratic, 'sender keep all "network of networks."'
This paper will examine the evolution of ISP interconnection arrangements with an eye toward determining the consequences resulting from the migration from sender-keep-all, zero cost interconnection arrangements to commercially driven ones modeled closely after conventional telecommunication carrier-to-carrier interconnection agreements. While private peering will enhance quality of service and network reliability, it may trigger the same sort of parity and cost of access concerns raised by competitive local exchange carriers and other market entrants. The paper concludes that Internet interconnection and cost of access have begun to raise the same sort of questions raised by local and interexchange carrier interconnection.
JEL Classification: K2, L5, O3
Suggested Citation: Suggested Citation