TY - JOUR
T1 - Internet interconnection and the off-net-cost pricing principle
AU - Laffont, Jean Jacques
AU - Marcus, Scott
AU - Rey, Patrick
AU - Tirole, Jean
N1 - Copyright:
Copyright 2018 Elsevier B.V., All rights reserved.
PY - 2003
Y1 - 2003
N2 - We develop a framework for Internet backbone competition. In the absence of direct payments between websites and consumers, the access charge allocates communication costs between websites and consumers and affects the volume of traffic. We analyze the impact of the access charge on competitive strategies in an unregulated retail environment. In a remarkably broad range of environments, operators set prices for their customers as if their customers' traffic were entirely off-net. We then compare the socially optimal access charge with the privately desirable one. Finally, when websites charge micropayments, or sell goods and services, the impact of the access charge on welfare is reduced; in particular, the access charge is neutral in a range of circumstances.
AB - We develop a framework for Internet backbone competition. In the absence of direct payments between websites and consumers, the access charge allocates communication costs between websites and consumers and affects the volume of traffic. We analyze the impact of the access charge on competitive strategies in an unregulated retail environment. In a remarkably broad range of environments, operators set prices for their customers as if their customers' traffic were entirely off-net. We then compare the socially optimal access charge with the privately desirable one. Finally, when websites charge micropayments, or sell goods and services, the impact of the access charge on welfare is reduced; in particular, the access charge is neutral in a range of circumstances.
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U2 - 10.2307/1593723
DO - 10.2307/1593723
M3 - Article
AN - SCOPUS:0043246463
VL - 34
SP - 370
EP - 390
JO - RAND Journal of Economics
JF - RAND Journal of Economics
SN - 0741-6261
IS - 2
ER -