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E. Giovannetti and C.~A. Ristuccia, "Estimating Market Power in the Internet Backbone Using Band-X data" June 2003.
Estimating Market Power in the Internet Backbone Using Band-X data
Authors: E. Giovannetti
C. A. Ristuccia
Published: Cambridge Working Papers in Economics, 2003
URL:http://ideas.repec.org/p/cam/camdae/0332.html
http://econpapers.hhs.se/paper/camcamdae/0332.htm
Entry Date: 2004-06-30
Datasets:
  • Daily prices and quality metrics for transit contracts from Band-X (July 3 to November 5, 2002)
  • Band-X is an Online Internet Transit trading place that provides daily prices for transit at different bandwidths and contract lengths (1 month, 3 months, etc.) from connection locations in London and New York.
  • Quality metrics are provided and measured by Band-X, not those that may be in a service agreement. They include RTT, packet loss %, transfer rate, and hop count to specified destinations.
  • Seller of a contract is identified only by a dummy (A, B, C, D, ...)
Experiments: Panel data regression was done, showing the affect and statistical significance of different variables on the offered price.
Results:
  • Price variations are only marginally affected by qualitiative dimensions.
  • Price variance is mostly explained by the companies' dummy with high coefficients and high statistical significance.
  • Market power does exist in the internet connectivity market, even when the providers are supposedly anonymous.
  • The customers may be able to determine the provider after purchasing a contract, or price may be used as a signal of other qualities that affect preference of provider such as size and reputation.
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