A Study On The Government Regulation Of Interconnection Settlement Between Internet Backbone Providers In China

In recent years, the internet industry is booming. The new business emerges in endlessly. Therefore, the requirement of broadband users for backbone network has improved a lot, and the problems of interconnection between internet backbone providers have drawed the attentions of all countries. As the largest developing country, China is in a rapid economic development period. Its development of internet industry is also very rapid. Almost all walks of life are in need of network to deal with daily business. So internet is essential to the development of economy in China. Therefore, advancing the interconnection between internet backbone providers, solving the problem of settlement, improving the quality of interconnection between backbone networks are of great significance to the development of economy in China. This is the basic starting point of this paper.Chinese internet started late. Because of network security, the government only allows peering and transit is banned. As a result, a special interconnection architecture is formed in the backbone market of China. China Telecom and China Unicom are nearly in monopoly positions. This leads to the backbone market lack of competition following the fact that the interconnection problems could not be effectively solved. The remaining problems result in higher price paid by users. In addition, not only the internet speed is far less than developed countries, but also the price of bandwidth is way higher. The slow internet speed is a common phenomenon in our country. With the emergence of new internet business, speed appears to be a even bigger obstacle when trying to meet the demand of society for good network speed. Even so, the settlement issue between China Telecom and China Unicom has always been controversial because both of them want to maximize their own interests. So the quality of communication network is poor. Furthermore, not only does a small backbone have to pay more, but also it can’t get promise for high interconnection quality. These problems have seriously hindered the development of interconnections making the cost of internet industry high and the social welfare also takes the heat. Therefore, solving the issues of interconnection and settlement between internet backbone providers in a reasonable and effective way, greatly enhancing the quality of network communication, creating a fair and harmonious network community, maximizing the society welfare are what the government need to face and solve.Based on the mentioned problems above, and build on the CRT(2000) model, this paper mainly analyzes the interconnection quality in different situations. From the results of the model, we can compare the values of interconnection quality in different situations. We can see that the interconnection quality can reach the maximum when the two top backbones choose paid peering under government regulation. Namely, the social welfare is maximum. This conclusion can provide theoretical support for the relevant departments when they set up the regulation measures of interconnection settlement in a reasonable and effective way. The sensitivity analysis and the comparison of the interconnection quality is the core part of this paper. At the same time, from the analysis of the reality of the settlement between backbones and the conclusion coming from the model, the paper put forward some corresponding solutions for the government to solve the problems of interconnection and settlement between backbones in the current and future phase. Therefore, this paper has not only academic significance, but also a practical significance. The paper only studies two internet backbone providers who choose peering, which reflects the limitations of this paper.