Content Providers and the Deployment of Internet Infrastructure

Abstract

This paper documents the role that content providers play upstream in the global internet supply chain. Using novel data, we establish three stylized facts: (1) Content providers have become the largest buyers of bandwidth capacity, their share of global used bandwidth has grown dramatically (from 5% to 69%) over the period 2005–2021, with important heterogeneity across regions. (2) Content providers (in particular, Amazon, Google, Meta, and Microsoft) are vertically integrating into the provision and operation of internet infrastructure, accounting for an increasingly important share of investment in internet cable infrastructure. (3) The growth in content providers’ demand is in part associated with the roll-out of their data centers globally and corresponding increase in inter-data center traffic; their investment in private cables is in part driven by data center siting, which are in locations that may lack connectivity to public internet cables. We discuss implications of these trends for innovation, internet traffic transparency, technology standard adoption, and network resilience.

Keywords: internet backbone, content providers, bandwidth market, vertical integration

JEL Classification: L13, L96, L86