‘Unfair’ Discrimination in Two-sided Peering? Evidence from LINX

‘Unfair’ Discrimination in Two-sided Peering? Evidence from LINX Abstract: Does asymmetry between Internet Providers affect the “fairness” of their interconnection contracts? While recent game theoretic literature provides contrasting answers to this question, there is a lack of empirical research. We introduce a novel dataset on micro-interconnection policies and provide an econometric analysis of the determinants of peering decisions amongst the Internet Service Providers interconnecting at the London Internet Exchange Point (LINX). Our key result shows that two different metrics, introduced to capture asymmetry, exert opposite effects. Asymmetry in “market size” enhances the quality of the link, while asymmetry in “network centrality” induces quality degradation, hence “unfairer” interconnection conditions

Is America Exporting Misguided Telecommunications Policy? The U.S.-Japan Telecom Trade Negotiations and Beyond

Global telecommunications markets have traditionally been closed to foreign trade and investment. Recent World Trade Organization negotiations resulted in a Basic Telecommunications agreement that sought to construct a multilateral framework to reverse that trend and begin opening telecom markets worldwide. Regrettably, this new WTO framework is quite ambiguous and open to pro-regulatory interpretations by member states. In fact, during recent bilateral trade negotiations with Japan, U.S. government officials adopted the position that the new framework allowed them to demand that the Japanese government adopt very specific regulatory provisions regarding telecom network interconnection and pricing policies. The Office of the U.S. Trade Representative argued that Japanese officials should require their domestic telecom providers to share their networks with rivals at a generously discounted price to encourage greater resale competition. Those interconnection and line-sharing rules were borrowed directly from the U.S. Telecommunications Act of 1996, a piece of legislation that remains the subject of intense debate within the United States. Good evidence now exists that those rules generally retard net-work investment and innovation by encouraging infrastructure sharing over facilities-based investment. Consequently, the USTR has generated resentment on the part of Japan and other trading partners as it has attempted to force them to adopt heavy-handed telecommunications mandates that have very little to do with legitimate free-trade policy. The USTR must discontinue efforts to impose American telecommunications regulations on other countries as part of free-trade negotiations and should instead focus on reforming or eliminating the most serious barriers to foreign direct investment both here and abroad

The Growing Complexity of Internet Interconnection

End-to-End (E2E) packet delivery in the Internet is achieved through a system of interconnections between heterogeneous entities called Autonomous Systems (ASes). The initial pattern of AS interconnection in the Internet was relatively simple, involving mainly ISPs with a balanced mixture of inbound and outbound traffic. Changing market conditions and industrial organization of the Internet have jointly forced interconnections and associated contracts to become significantly more diverse and complex. The diversity of interconnection contracts is significant because efficient allocation of costs and revenues across the Internet value chain impacts the profitability of the industry. Not surprisingly, the challenges of recovering the fixed and usage-sensitive costs of network transport give rise to more complex settlements mechanisms than the simple bifurcated (transit and peering) model described in many earlier analyses of Internet interconnection (see BESEN et al., 2001; GREENSTEIN, 2005; or LAFFONT et al., 2003). In the following, we provide insight into recent operational developments, explaining why interconnection in the Internet has become more complex, the nature of interconnection bargaining processes, the implications for cost/revenue allocation and hence interconnection incentives, and what this means for public policy. This paper offers an abbreviated version of the original paper (see FARATIN et al., 2007b).internet interconnection, economics, public policy, routing, peering.

Asymmetry and Discrimination in Internet Peering Evidence from the LINX

Is the quality of interconnection between Internet operators affected by their asymmetry? While recent game theoretic literature provides contrasting answers to this question, there is a lack of empirical research. We introduce a novel dataset based on Internet routing policies, and study the interconnection decisions amongst the Internet Service Providers (ISPs) members of the London Internet Exchange Point (LINX). Our results show that interconnection quality degradation can be significantly explained by asymmetry between providers. We also show that Competition Authorities should focus more on the role played by the “centrality of an operatorâ€, rather than on its market share.Internet Peering, Two-sided Markets, Network Industries, Antitrust, Net Neutrality