Banded Frameworks of Interconnectedness: Industry Structure Determinants

The Internet industry is generally considered to be vertically structured with the Internet Backbone Provider (IBPlong distance service carrier) in the upstream and Internet Service Providers (ISP) in the downstream. Although there are many ISPs and IBPs in each stream, both markets are considered independent oligopolies in that there are a few dominant providers for both ISPs and IBPs. The market leaders in each market create their own hierarchical tier and it is generally accepted that the Internet industry structure has evolved into a four-tier hierarchical structure. To understand the Internet industry, it is necessary to understand interconnection between ISPs and IBPs. The key element as an industry structural determinant is peering interconnection and the relationship created by that interconnectedness. Peering interconnection occurs within the same tier and the transit interconnection between the different tiers. This paper examines the internet industry structure using market share and interconnection strategies.