The Economics of the Internet Backbone

58 Pages Posted: 8 Dec 2004

See all articles by Nicholas Economides

Nicholas Economides

New York University - Leonard N. Stern School of Business - Department of Economics

Date Written: June 2005

Abstract

This paper discusses the economics of the Internet backbone. I discuss competition on the Internet backbone as well as relevant competition policy issues. In particular, I show how public protocols, ease of entry, very fast network expansion, connections by the same Internet Service Provider (ISP) to multiple backbones (ISP multi-homing), and connections by the same large web site to multiple ISPs (customer multi-homing)enhance price competition and make it very unlikely that any firm providing Internet backbone connectivity would find it profitable to degrade or sever interconnection with other backbones in an attempt to monopolize the Internet backbone.

Keywords: Internet backbone, network effects, competition, monopoly, MCI, WorldCom, tipping

JEL Classification: L12, L13, C63, D42, D43

Suggested Citation

Economides, Nicholas, The Economics of the Internet Backbone (June 2005). NYU, Law and Economics Research Paper No. 04-033; and NET Institute Working Paper No. 04-23, Available at SSRN: https://ssrn.com/abstract=613581 or http://dx.doi.org/10.2139/ssrn.613581

Nicholas Economides (Contact Author)

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