The Internet industry is vertically integrated with Internet Backbone Providers (IBPs) and Internet Service Providers (ISPs.) Although there are many ISPs and IBPs in each stream, both markets are considered independent oligopolies in that there are a few dominant competitors in each market. It is generally accepted that the Internet industry structure has evolved into a four-tier hierarchical structure. The synergistic and codependent nature of the Internet industry is the key element in understanding the competitive environment in which both IBP’s and ISP’s cooperate. Peering is an efficient way to exchange traffic freely within the access tier, nevertheless competitive constraints limit within tier exchanges. This paper combines the value chain model, competitive force model and a game model to illustrate the interconnection competitive perspective between IBP and ISPs and demonstrate why peering is difficult in the local access market.
Shin, Seungjae and Tucci, Jack E.
"Internet Industry Competition Dynamics: Peering Limitations, Exposure, and Counter Strategies,"
Journal of International Technology and Information Management: Vol. 16
, Article 5.
Available at: http://scholarworks.lib.csusb.edu/jitim/vol16/iss4/5