Abstract:

Internet interconnection settlement was studied to promote Internet development and to make out reasonable interconnection policy. Different Internet backbone providers have different preferences of interconnection quality. The larger backbone prefers a lower quality of interconnection than the smaller backbone does. The best level of connectivity should be intermediated between what would be optimal for each backbone from the point of society. Under these circumstances, the smaller in general bribes the larger network to accept a higher level of connectivity, which is also Pareto betterment. Introducing the focal point equilibrium, two backbones determine interconnection quality through bargaining, which decreases exchange cost and regulatory cost.

Key words: Internet interconnection, settlement, focal point, baRgaining