Peer­ing and tran­sit mar­kets

In the past decade, the use of the internet for both personal and business purposes has become even more important. Consumers now take it for granted that they can stream video and audio content. This has led to an upwards trend in traffic volumes.

Retail customers access content and applications from CAPs (content and application providers). To enable transmission of these content and applications to end-users, the networks involved have to interconnect. This takes place on the internet via transit or peering. Network operators make transit agreements with other network operators to offer them connectivity to the whole internet in return for a fee. Peering, by contrast, involves network operators exchanging traffic between themselves, usually at no charge.

The Body of European Regulators for Electronic Communications (BEREC) has examined these IP-interconnection markets several times already, most recently in 2017). It concluded then that the internet ecosystem was still able to cope with increasing traffic volumes. Where disputes emerged in practice, these were typically solved in the market without regulatory intervention.

The WIK institute was commissioned by the Bundesnetzagentur to carry out a study on competition in the transit and peering markets ("Competitive conditions on transit and peering markets - Implications for European digital sovereignty (pdf / 2 MB)"). This study builds on the previous BEREC reports and looks at the major market/competition-related changes that have taken place since them. It presents the main developments of recent years in IP traffic and sheds light on the key factors influencing market developments. It also looks at the market position of the relevant players and the power structures existing among these players. The basic question here is whether content providers are more dependent on internet access providers or the other way around, or whether this varies from case to case.

This study is currently highly relevant, not least in light of the ongoing calls from European telecommunications network operators for big content providers to pay a "fair" share of the costs for expanding the network.