Connectivity in the Commercial Internet

We study the ‘backbone market’ in the Internet. After discussing the structure of the Internet, we use an extension of the Katz‐Shapiro network model to analyze the strategies that would be used by dominant backbone. We show that a larger backbone prefers a lower quality interconnection than the smaller one. We then analyze a ‘targeted degradation’ strategy where the larger backbone lowers the quality of interconnection to its smaller rivals in turn. Finally, we show that the qualitative results are robust to the possibility of ‘multihoming’ by clients.