IP Interconnection market study 2021
The Netherlands Authority for Consumers and Markets (ACM) has carried out a study into the market for IP interconnections, which is a market that is essential to the proper functioning of the Internet. IP interconnection ensures that different networks are able to exchange data: as a result thereof, providers of internet access, content (such as games, working in the Cloud, or IoT applications), and services are connected to each other so that, at the end of the day, end-users are properly served. Since ACM’s last study (in 2015), much has happened in this market. The volume of exchanged data has roughly tripled worldwide. On the AMS-IX (the Amsterdam Internet Exchange) in 2020, for example, that led to an increase in the peak load from 3 Terabyte per second to 9 TBPS.
In addition to this increase in volume, the market participants themselves have also grown. Over the past five years, the number of internet providers has decreased as a result of mergers. Data centers have been acquired by other providers, predominantly US providers. The market for content has become a global market, and is also dominated by major competitors.
Conversations with various market participants have revealed that, compared with the rest of the world, the market for IP interconnections in the Netherlands and the rest of Europe functions well: the digital infrastructure in the Netherlands is of high quality, oversight is effective, and competition is healthy. Those same market participants, however, do feel that the market is changing. Major competitors increasingly connect to each other directly, often at no cost. Smaller competitors have to turn to so-called internet exchanges, intermediaries, and contracts against payment.
ACM sees that, on the market of IP interconnections, economies of scale play an important role in the competitive landscape, like in other digital and tech markets. That makes it more difficult for smaller competitors and new entrants to enter those markets and to grow. However, such smaller competitors and new entrants are important for competition and innovation in the long run on the market for IP interconnections. That is why this is a point for attention.
ACM calls on market participants to contact ACM if they experience problems where ACM can play a role, for example, if a market participant refuses to interconnect or to negotiate about it, if it does not want to interconnect at market prices or against fair conditions, or if it seems to abuse its dominant position. ACM may be able to solve the issue. Tip-offs help ACM understand this market better. Tip-offs can be submitted online and also anonymously.