The Role of Switching Hub in Global Internet Traffic

Chang-Ho Yoon (), Young-Woong Song and Byoung Jun ()
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Chang-Ho Yoon: Department of Economics, Korea University
Young-Woong Song: SK Research Institute for SUPEX Management

No 507, Discussion Paper Series from Institute of Economic Research, Korea University

Abstract: In the recent decade, global backbone providers have emerged to link dispersed networks. Local networks obtain global connectivity through transit contracts with switching hubs. Using the Shapley value, the paper shows that the bargaining position of the local network depends upon the quality adjusted volume of net traffic, and that the rent to the hub depends on the volume of traffic between local networks. When there are two competing switching hubs, the larger hub can appropriate most of the rent. Anticipating this, the hubs tend to expand their capacity to preempt the market like in the prisoners¡¯ dilemma.

JEL-codes: L1 L86 (search for similar items in EconPapers)
Date: 2005
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Journal Article: The Role of Switching Hubs in Global Internet Traffic (2005)
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