Estimating market power in the Internet backbone. Using the IP transit Band-X database

Recent studies have found the Internet backbone to be more competitive than was thought before. This paper explores a novel route to monitor market power using prices and quality data from the online trading site Band-X. First the hypothesis that Europe is a connectivity market on its own, is tested and then, by using a Panel data regression, the paper finds that these markets are not fully competitive since company specific reputation effects play a major role and price variations are only marginally affected by qualitative variables. Worryingly, companies with high prices are often able to supply an inferior quality transit.