The Economics of the Internet Backbone
58 Pages Posted: 8 Dec 2004
Date Written: June 2005
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
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