Estimating Market Power in the Internet Backbone Using Band-X data

Abstract

Recent industry studies found the Internet backbone industry competitive. In our paper we explore a novel route to monitor for market power using prices and quality data from Band-X. First we test the hypothesis that Europe is a connectivity market on its own, unchallenged by the US and then, by using a Panel data Regression, we find that these markets are not very competitive since brand effects play a major role because price variations are only marginally affected by qualitative dimensions. More worryingly we find that companies with high prices are often able to supply an inferior quality I.P. transit.