This paper is focused not on the Internet architecture – as defined by layering, the narrow waist of IP, and other core design principles – but on the Internet infrastructure, as embodied in the technologies and organizations that provide Internet service. In this paper we discuss both the challenges and the opportunities that make this an auspicious time to revisit how we might best structure the Internet’s infrastructure. Currently, the tasks of transit-between-domains and last-mile-delivery are jointly handled by a set of ISPs who interconnect through BGP. In this paper we propose cleanly separating these two tasks. For transit, we propose the creation of a “public option” for the Internet’s core backbone. This public option core, which complements rather than replaces the backbones used by large-scale ISPs, would (i) run an open market for backbone bandwidth so it could leverage links offered by third-parties, and (ii) structure its terms-of-service to enforce network neutrality so as to encourage competition and reduce the advantage of large incumbents.
We consider the optimal design of flexible use in a digital-rights-management policy for a digital good subject to piracy. Consumers can acquire the digital good either as a licensed product or as an unlicensed copy. The ease of access to unlicensed copies is increasing in the flexibility accorded to licensed copies. The content provider has to trade off consumers’ valuation of a licensed copy against the sales lost to piracy.
We enrich the basic model by introducing a “secure platform” that is required to use the digital good. We show that the platform allows for the socially optimal provision of flexibility for the digital good but only if both are sold by an integrated firm.
We consider the optimal design of flexible use in a digital-rights-management policy. The basic model considers a single distributor of digital goods and a continuum of consumers. Each consumer can acquire the digital good either as a licensed product or an unlicensed copy. The availability of (or access to) unlicensed copies is increasing both in the number of licensed copies and in the flexibility accorded to licensed copies. We thus analyze the optimal design of flexibility in the presence of unlicensed distribution channels (the “greynet”).
We augment the basic model by introducing a “secure platform” that is required to use the digital good. We compare the optimal design of flexibility in the presence of a platform to the one without a platform. Finally, we analyze the equilibrium provision when platform and content are complimentary goods but are distributed and priced by different sellers.
Keywords: Digital Rights Management, Platform, Flexibility, Piracy