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Multihoming, content delivery networks, and the market for Internet connectivity

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  • Hau, Thorsten
  • Burghardt, Dirk
  • Brenner, Walter

Abstract

Peering points between different Internet service providers (ISPs) are among the bottlenecks of the Internet. Multihoming (MH) and content delivery networks (CDNs) are two technical solutions to bypass peering points and to improve the quality of data delivery. So far, however, there is no research that analyzes the economic effects of MH and CDNs on the market for Internet connectivity. This paper develops a static market model with locked-in end users and paid content. It shows that MH and CDNs create the possibility for terminating ISPs to engage in monopolistic pricing towards content providers, leading to a shift of rents from end users and content providers to ISPs. Implications for future innovations are discussed.

Suggested Citation

  • Hau, Thorsten & Burghardt, Dirk & Brenner, Walter, 2011. "Multihoming, content delivery networks, and the market for Internet connectivity," Telecommunications Policy, Elsevier, vol. 35(6), pages 532-542, July.
    • Handle: RePEc:eee:telpol:v:35:y:2011:i:6:p:532-542
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    1. Baake, Pio & Sudaric, Slobodan, 2018. "Net Neutrality, Prioritization and the Impact of Content Delivery Networks," Rationality and Competition Discussion Paper Series 102, CRC TRR 190 Rationality and Competition.
    2. Zhang, Nan & Levä, Tapio & Hämmäinen, Heikki, 2014. "Value networks and two-sided markets of Internet content delivery," Telecommunications Policy, Elsevier, vol. 38(5), pages 460-472.
    3. Baake, Pio & Sudaric, Slobodan, 2019. "Net neutrality and CDN intermediation," Information Economics and Policy, Elsevier, vol. 46(C), pages 55-67.

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