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

Author

Listed:
  • Narine Badasyan

    (Virginia Polytechnic & State University)

  • Subhadip Chakrabarti

    (Virginia Polytechnic & State University)

Abstract
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.

Suggested Citation

  • Narine Badasyan & Subhadip Chakrabarti, 2004. "Intra-backbone and Inter-backbone Peering Among Internet Service Providers," Industrial Organization 0407004, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpio:0407004
    Note: Type of Document - pdf; pages: 29
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    References listed on IDEAS

    as
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    Keywords

    Peering; Networks;

    JEL classification:

    • L - Industrial Organization

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