Emanuele Giovannetti

Interconnection, Differentiation and Bottlenecks in the Internet

Connectivity, the characterising feature of the Internet, requires the definition of access prices, transit charges, among connected operators. However, for many information exchanges, the network hierarchies in the Internet are not fixed: two providers can be simultaneously supplier and retailer, in a routing process, while being horizontally competitors in another. We study the impact of interconnection with transit demand on prices and profits for Internet Service Providers. These effects crucially depend on the degree of differentiation of the retail sector.

Perpetual Leapfrogging in Bertrand Duopoly

We consider different patterns of infinite technological adoption choices by firms in a Bertrand duopoly. Every period technological progress provides a sequence of cost reducing innovations. The equilibrium concept is Markov perfect equilibrium. We analyze conditions for which equilibrium adoption leads to persistent leadership and those where firms alternate in adoption inducing leapfrogging. Only leapfrogging (cads to technological improvement in the long run. Demand conditions play a crucial role in determining whether leapfrogging can be perpetual in Bertrand duopoly.

Information Technology Policy and the Digital Divide

The proliferation of new information technologies throughout the world has raised some important questions for policymakers as to how developing countries can benefit from their diffusion. This important volume compares the advantages and disadvantages of the IT revolution through detailed studies of a variety of developed and developing nations and regions: Argentina, Estonia, the EU, India, Japan, Korea, Mexico, South Africa, Thailand and the USA.

Spatial Dispersion of Peering Clusters in the European Internet

We study the role played by geographical distance in the peering decisions between Internet Service Providers. Firstly, we assess whether or not the Internet industry shows clustering in peering; we then concentrate on the dynamics of the agglomeration process by studying the effects of bilateral distance in changing the morphology of existing peering patterns. Our results show a dominance of random spatial patterns in peering agreements. The sign of the effect of distance on the peering decision, driving the agglomeration/dispersion process, depends, however, on the initial level of clustering. We show that clustered patterns will disperse in the long run.

Three Cases in Search of a Theory: Resale Price Maintenance in the UK

Vertical agreements in general, and resale price maintenance (RPM) in particular, can be used both in a pro-competitive way by improving efficiencies and facilitating entry into new markets, and in an anticompetitive way by blocking new entrants, restoring monopoly profits, dampening competition or facilitating collusion. One element stands out when assessing this crucial trade-off in determining the likely impact on competition, and finally on consumers, of vertical restraints in general: the importance of the market context. The presence of effective upstream competition helps the procompetitive and efficiency effects of vertical restraints. On the other hand, anticompetitive effects are more likely when upstream competition is weak and there are barriers to entry at either the producer or distributor level. For collusive anticompetitive effects to be a threat it is necessary that suppliers or retailers form a tight oligopoly such that RPM is applied by all or many of them. The likely influence of the market context on the welfare effects of RPM is better assessed by matching a careful analysis of the empirical evidence obtained from case studies and investigations conducted by national competition authorities (NCAs), with the analytical results derived from stylised economic models. This paper provides an assessment of three RPM cases in the UK, following a roadmap provided by recent theoretical insights on plausible anticompetitive harm due to RPM in specific market contexts.

Agglomeration in Internet Co-operation Peering Agreements

Peering decisions between Internet Service Providers contain substantial non-measurable aspects requiring trust and informal cooperation among peering partners. We study whether spatial agglomeration is observed between Internet peers. Our empirical analysis of the bilateral peering decisions at the Milan Internet Exchange confirms that these decisions are significantly influenced by: travel time between ISPs headquarters- a proxy for distance, bandwidth- a proxy for size, and European connectivity. Proximity still plays a role in reducing the transaction costs of monitoring and punishing deviant behavior within an industry were co-operation is essential for efficient traffic exchanges required by the Internet universal connectivity.

'Unfair' Discrimination in Two-sided Peering? Evidence from LINX

Does asymmetry between Internet Providers affect the “fairness” of their interconnection contracts? While recent game theoretic literature provides contrasting answers to this question, there is a lack of empirical research. We introduce a novel dataset on micro-interconnection policies and provide an econometric analysis of the determinants of peering decisions amongst the Internet Service Providers interconnecting at the London Internet Exchange Point (LINX). Our key result shows that two different metrics, introduced to capture asymmetry, exert opposite effects. Asymmetry in “market size” enhances the quality of the link, while asymmetry in “network centrality” induces quality degradation, hence “unfairer” interconnection conditions.

Spatial Dispersion of Interconnection Clusters in the European Internet

Abstract This paper studies the effects of geographical distance on the interconnection agreements between providers participating at Internet Exchange Points (IXPs) in Europe. We assess separately two main issues: the extent of existing clustering, as well as the role of proximity in bilateral interconnection decisions. Our results show the dominance of spatial random patterns in the interconnection agreement distributions. On the other hand, we find that proximity positively affects the probability of establishing interconnection for all the IXPs studied but one. Interesting, the latter is the only one showing an initially clustered morphology. This indicates a prevalence of centripetal forces—local spillovers and mutual knowledge—over geographical differentiation for any pre-existing interconnection pattern morphology except the clustered ones.

Morphogenesis of an Institution on a Lattice Game

In this paper we study the morphogenesis of an institution when local social interactions are taken into account. The structure we obtain has characteristics of “self-organized criticality”. After a transient period the system self-organizes into a configuration which is compatible with a high degree of differentiation among different sites and generates typical power laws.

Resale Price Maintenance: An Empirical Analysis of UK Firms' Compliance

Empirical evidence on resale price maintenance (RPM) is scarce. This article provides novel empirical evidence based on a unique database of RPM complaints, lodged in the UK to the Office of Fair Trading (OFT) between 2007 and 2009. We describe the characteristics of the commodity being traded and of the relevant upstream and downstream firms and their sectors. We then present an econometric analysis to assess how the probability of compliance to the OFT request to withdraw the RPM can be affected by the specific features of the relevant economic context in which this restraint has taken place.