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The Impact of the General Data Protection Regulation on Internet Interconnection

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  • Ran Zhuo
  • Bradley Huffaker
  • KC Claffy
  • Shane Greenstein

Abstract

The Internet comprises thousands of independently operated networks, interconnected using bilaterally negotiated data exchange agreements. The European Union (EU)’s General Data Protection Regulation (GDPR) imposes strict restrictions on handling of personal data of European Economic Area (EEA) residents. A close examination of the text of the law suggests significant cost to application firms. Available empirical evidence confirms reduction in data usage in the EEA relative to other markets. We investigate whether this decline in derived demand for data exchange impacts investment in interconnection by networks in the EEA relative to networks in non-EEA OECD countries. Our data consists of a large sample of interconnection agreements between networks globally in 2015–2019. All evidence estimates precisely zero effects: the number of observed agreements, the inferred agreement types, and the number of observed IP-address-level interconnection points per agreement. We also find economically small effects of the GDPR on the entry and the observed number of customers of networks. We conclude there is no visible short run consequence of the GDPR at the internet layer.

Suggested Citation

  • Ran Zhuo & Bradley Huffaker & KC Claffy & Shane Greenstein, 2019. "The Impact of the General Data Protection Regulation on Internet Interconnection," NBER Working Papers 26481, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:26481
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    Cited by:

    1. Garrett A. Johnson, 2022. "Economic Research on Privacy Regulation: Lessons from the GDPR and Beyond," NBER Chapters, in: The Economics of Privacy, National Bureau of Economic Research, Inc.
    2. Christian Peukert & Stefan Bechtold & Michail Batikas & Tobias Kretschmer, 2022. "Regulatory Spillovers and Data Governance: Evidence from the GDPR," Marketing Science, INFORMS, vol. 41(4), pages 746-768, July.
    3. Shane Greenstein, 2020. "The Basic Economics of Internet Infrastructure," Journal of Economic Perspectives, American Economic Association, vol. 34(2), pages 192-214, Spring.
    4. Congiu, Raffaele & Sabatino, Lorien & Sapi, Geza, 2022. "The Impact of Privacy Regulation on Web Traffic: Evidence From the GDPR," Information Economics and Policy, Elsevier, vol. 61(C).
    5. Kretschmer, Tobias & Peukert, Christian & Bechtold, Stefan & Batikas, Michail, 2020. "European Privacy Law and Global Markets for Data," CEPR Discussion Papers 14475, C.E.P.R. Discussion Papers.
    6. Carl Benedikt Frey & Giorgio Presidente, 2024. "Privacy regulation and firm performance: Estimating the GDPR effect globally," Economic Inquiry, Western Economic Association International, vol. 62(3), pages 1074-1089, July.

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    More about this item

    JEL classification:

    • L00 - Industrial Organization - - General - - - General
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software

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