Cooperation and Internet Quality of Service

Abstract: The internet presents a complex challenge for quality provisioning. A large part of the complication comes from its highly decentralized architecture, which contrasts with the more centralized delivery models of other network industries such as water, electricity, large-scale mass transport, and traditional telecommunications. This decentralized architecture implies highly dispersed responsibility for quality provisioning. As shown by Cremer, Rey and Tirole (2000), an end user’s quality experience depends not only on their direct providers but also on an ecosystem of network players engaged in various degrees of competition and cooperation. In this paper, we hypothesize that country-level internet service quality varies positively with the extent to which local network players are able to cooperate through participation in local internet exchange points (IXPs). We assembled a panel dataset of country-level internet service quality metrics (i.e. download speed and latency), IXP numbers, membership and traffic levels as well as various control variables including state of broadband development, level of economic development, measures of institutional quality, and political freedom. We find that for countries with the same level of economic development and status of broadband uptake, growth in IXP membership and traffic levels is a good predictor of lower latency but not download speed. Cooperation matters for some but not all dimensions of internet service quality.