How to Provide Quality of Service Guarantees in the Internet? Lessons Learnt from the Airline and Card-Based Payment Sectors

Abstract

The increasing demand for real-time applications (video conferencing, Internet telephony - VoIP - etc.) delivered over Internet networks requires stringent Quality of Service (QoS) guarantees. Internet traffic routing based on a Best-effort basis can hardly support these QoS requirements. This article argues that Internet services providers should form strategic alliances to coordinate their investments in a new-generation infrastructure and provide innovative services with QoS guarantees. This is supported by a topological analysis of the interconnection agreements among top-level Internet providers and by the lessons derived from alliances forged in the airline and card-based payment sectors. We conclude that on the Internet, the optimal organizational form should be a centralized alliance with a hub-and-spoke network structure.

Keywords: Internet, Quality of Service (QoS), Interconnection Agreements, Alliances, Networks

JEL Classification: L2, L86, O3