The Economic Impact of Internet Traffic Growth on Network Operators

71 Pages Posted: 29 Nov 2014  

J. Scott Marcus

Bruegel; European University Institute - Florence School of Regulation

Date Written: October 24, 2014

Abstract

In recent years, a number of telecommunications network operators have repeatedly raised concerns that the explosive growth of Internet traffic is causing their costs to spiral out of control, to the point where their services may no longer be sustainable. We find that this concern is not well supported by the data. While Internet traffic is certainly increasing, there have also been offsetting cost reductions thanks to technological innovation. On fixed networks, the total usage-based cost per user is likely declining, despite the increase in traffic; on mobile networks, although the usage-based cost per user cost is likely increasing, network operators are benefiting both from cost declines, and from offsetting revenue increases. The current data continue to demonstrate that traffic growth is not a root cause of the challenges that network operators face.

Keywords: Internet, content provider, network operator, two-sided market

JEL Classification: H54, L51, L86, L91

Suggested Citation

Marcus, J. Scott, The Economic Impact of Internet Traffic Growth on Network Operators (October 24, 2014). Available at SSRN: https://ssrn.com/abstract=2531782 or http://dx.doi.org/10.2139/ssrn.2531782

J. Scott Marcus (Contact Author)

Bruegel ( email )

Rue de la Charité 33
B-1210 Brussels Belgium
Belgium

European University Institute - Florence School of Regulation ( email )

Florence
Italy

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