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Competition in the Internet Backbone Market

This paper presents a competitive assessment of the global market for the provision of universal Internet connectivity (backbone market). We discuss the approach followed by the EC Commission in two important merger cases. The main argument is for a restless evolution of the structure of the market, whereby an highly concentrated US-centric industry, with a strict vertical hierarchy between Internet Service Providers and a neat separation between first-level ISPs and the rest of the market, is going to be superseded by a more horizontally shaped configuration. It is argued that, as the landscape of the industry is subject to continuous change, the approach followed by the EC Commission in assessing the competitive forces that drive the industry is likely to be no longer appropriate. New behavioral strategies, such as differentiation through the introduction of new enhanced Internet services based on the concept of Quality of Service, and, related to that, new competitive threats seem to characterize the foreseeable future of the Internet. We then investigate the competitive concerns that might emerge in the new environment.



Date: June 2005
Author(s): Paolo Buccirossi, Laura Ferrari Bravo, Paolo Siciliani
Tag(s): Research Papers , Abuse of Dominance, Competition Economics, Mergers