Peering and Roaming on the Internet

Over the last decade the Internet has grown to the point of pervading everyday commodities in developed countries’ households and of transforming, with different diffusion rates and adoption modalities, the communication landscapes in their developing counterparts. The number of broadband subscribers in the OECD countries increased by 26% from 157 million in December 2005 to 197 million in December 2006 and broadband penetration rates rose, in these countries, from 13.5 subscriptions per 100 inhabitants in December 2005 to 16.9 1 year later. The other side of this success story is expressed by a growing preoccupation that, while still coping with increasing users’ numbers in many ways the Internet only just works. The number of ways in which it ‘only just works’ seems to be increasing with time, as non-critical problems build’ (Handley, 2006, p. 129). While computer scientists have long been recognising the technical challenges brought forward by Internet growth, the economic analysis of the incentives underlying the capacity of the ‘network of networks’ to keep working, and hopefully not ‘just working’, is still unsatisfactory. While there has been an important number of seminal papers focusing on the economics of interconnection in the Internet, the analysis of the formation, stability and efficiency of bilateral and/or multilateral linkages among competing players, delivering global Internet connectivity (a composite service hosting a growing number of applications enabled both through fixed and wireless access), remains an open challenge. This special issue of Telecommunications Policy presents contributions aiming to move the frontier of this challenge one step forward by focusing on the economic agreements that make the ‘just working’ notion of the Internet possible. In particular, it focuses on three sets of interconnection choices: (a) whether two operators should agree to directly exchange traffic destined to each other without using the services of an intermediary and usually forbearing the exchange of money (peering), (b) whether Web sites should establish new direct bilateral links, thereby increasing web connectivity and (c) whether competing mobile operators should set up roaming and sharing agreements to provide full coverage for mobile Internet access. The common theme unifying most of the papers in this issue can be found in the analysis of the role played by the asymmetry between providers in shaping their incentives to reach these agreements. These contributions analyse asymmetry through the lenses of different game theoretic equilibrium concepts, spanning between static and repeated bilateral interconnection games, to games of global networks of relations and of endogenous network formation. This collection provides an example of how different typologies of network games can be of use in understanding and informing competition policies addressing concerns about interconnection practices among unequal players in the Internet