‘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

Spatial Dispersion of Peering Clusters in the European Internet

We study the role played by geographical distance in the peering decisions between Internet Service Providers. Firstly, we assess whether or not the Internet industry shows clustering in peering; we then concentrate on the dynamics of the agglomeration process by studying the effects of bilateral distance in changing the morphology of existing peering patterns. Our results show a dominance of random spatial patterns in peering agreements. The sign of the effect of distance on the peering decision, driving the agglomeration/dispersion process, depends, however, on the initial level of clustering. We show that clustered patterns will disperse in the long run

Internet Peering as a Network of Relations

We apply results from recent theoretical work on networks of relations to analyze optimal peering strategies for asymmetric ISPs. It is shown that - from a network of relations perspective – ISPs’ asymmetry in bilateral peering agreements need not be a problem, since when these form a closed network, asymmetries are pooled and information transmission is faster. Both these effects reduce the incentives for opportunism in general, and interconnection quality degradation in particular. We also explain why bilateral monetary transfers between asymmetric ISPs (Bilateral Paid Peering), though potentially good for bilateral peering, may have rather negative effects on the sustainability of the overall peering network.

Internet Peering as a Network of Relations

We apply results from recent theoretical work on networks of relations to analyze optimal peering strategies for asymmetric ISPs. It is shown that - from a network of relations perspective – ISPs’ asymmetry in bilateral peering agreements need not be a problem, since when these form a closed network, asymmetries are pooled and information transmission is faster. Both these effects reduce the incentives for opportunism in general, and interconnection quality degradation in particular. We also explain why bilateral monetary transfers between asymmetric ISPs (Bilateral Paid Peering), though potentially good for bilateral peering, may have rather negative effects on the sustainability of the overall peering network

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

Intra-backbone and Inter-backbone Peering Among Internet Service Providers

We consider a model with two backbones and a finite number of Internet Service Providers (ISPs) connected to the backbones. ISPs decide on private peering agreements, comparing the benefits of private peering to costs. Intra-backbone peering refers to peering between ISPs connected to the same backbone, whereas inter-backbone peering refers to peering between ISPs connected to different backbones. We formulate the model as a two-stage game. In the first stage, ISPs decide on peering agreements. In the second stage they compete in prices a la Bertrand. We examine the effects of peering on profits of ISPs. Peering affects profits through two channels - reduction of backbone congestion which we call the symmetric effect and ability to send traffic bypassing or circumventing congested backbones which we call the asymmetric effect. The first has a negative or ambiguous effect while the second has a generally positive effect on firm profits. The two often act against each other making the net effect ambiguous. We also conduct simulations to determine pairwise stable peering configurations in a six-provider model and find that there is a paucity of inter-backbone peering in asymmetric settings.Peering, Networks

Private Peering Among Internet Backbone Providers

We develop a model, in which Internet backbone providers decide on private peering agreements, comparing the benefits of private peering relative to being connected only through National Access Points. Backbone providers compete by setting capacities for their networks, capacities on the private peering links, if they choose to peer privately, and access prices. The model is formulated as a multistage game. We examine the model from two alternative modelling perspectives - a purely non-cooperative game, where we solve for Subgame Perfect Nash Equilibria through backward induction, and a network theoretic perspective, where we examine pairwise stable and efficient networks. While there are a large number of Subgame Perfect Nash Equilibria, both the pairwise stable and the efficient network are unique and the stable network is not efficient and vice versa. The stable network is the complete network, where all the backbone providers choose to peer with each other, while the efficient network is the one, where the backbone providers are connected to each other only through the National Access Points.Subgame perfect Nash equilibrium, networks, pairwise stability, efficiency

Private Peering Among Internet Backbone Providers

We develop a model, in which Internet backbone providers decide on private peering agreements, comparing the benefits of private peering relative to being connected only through National Access Points. Backbone providers compete by setting capacities for their networks, capacities on the private peering links, if they choose to peer privately, and access prices. The model is formulated as a multistage game. We examine the model from two alternative modelling perspectives - a purely non-cooperative game, where we solve for Subgame Perfect Nash Equilibria through backward induction, and a network theoretic perspective, where we examine pairwise stable and efficient networks. While there are a large number of Subgame Perfect Nash Equilibria, both the pairwise stable and the efficient network are unique and the stable network is not efficient and vice versa. The stable network is the complete network, where all the backbone providers choose to peer with each other, while the efficient network is the one, where the backbone providers are connected to each other only through the National Access Points.Subgame perfect Nash equilibrium, networks, pairwise stability, efficiency

Intra-backbone and Inter-backbone Peering Among Internet Service Providers

We consider a model with two backbones and a finite number of Internet Service Providers (ISPs) connected to the backbones. ISPs decide on private peering agreements, comparing the benefits of private peering to costs. Intra-backbone peering refers to peering between ISPs connected to the same backbone, whereas inter-backbone peering refers to peering between ISPs connected to different backbones. We formulate the model as a two-stage game. In the first stage, ISPs decide on peering agreements. In the second stage they compete in prices a la Bertrand. We examine the effects of peering on profits of ISPs. Peering affects profits through two channels - reduction of backbone congestion which we call the symmetric effect and ability to send traffic bypassing or circumventing congested backbones which we call the asymmetric effect. The first has a negative or ambiguous effect while the second has a generally positive effect on firm profits. The two often act against each other making the net effect ambiguous. We also conduct simulations to determine pairwise stable peering configurations in a six-provider model and find that there is a paucity of inter-backbone peering in asymmetric settings.Peering, Networks