Antitrust Analysis for the Internet Upstream Market: a BGP Approach

In this paper we study concentration in the European Internet upstream access market. The possibility of measuring market concentration depends on a correct definition of the market itself; however, this is not always possible, since, as it is the case of the Internet industry, very often Antitrust authorities lack reliable pricing and traffic data. This difficulty motivates our paper. We present an alternative approach based on the inference of the Internet Operators interconnection policies using microdata sourced from their Border Gateway Protocol tables. We assess market concentration following a two step process: firstly we propose a price-independent algorithm for defining both the vertical and geographical relevant market boundaries, then we calculate market concentration indexes using two novel metrics. These assess, for each undertaking, both its role in terms of essential network facility and of wholesale market dominance. The results, applied to four leading Internet Exchange Points in London, Amsterdam, Frankfurt and Milan, show that some vertical segments of these markets are highly concentrated, while others are extremely competitive. According to the Merger Guidelines some of the estimated market concentration values would immediately fall within the special attention category.