Content providers and the deployment of Internet infrastructure

Abstract

This paper documents the growing role that content providers play upstream in the global internet supply chain. Using novel data, we establish three stylized facts: (1) As bandwidth buyers, content providers' share of global used bandwidth has grown dramatically (from 5% to 69%) over the period 2005–2021, with important heterogeneity across regions. (2) Content providers (in particular, Amazon, Google, Meta, and Microsoft) account for an increasingly large share of investment in internet cable infrastructure. (3) The growth in content providers' demand is associated with the roll-out of their data centers globally and corresponding increase in inter-data center traffic; their investment in private cables is in part driven by data center siting, which are in locations that may lack connectivity to public internet cables. We discuss implications of these trends for innovation, internet traffic transparency, technology standard adoption, and network resilience. • The role of major technology firms known as content providers in fundamental internet infrastructure markets has increased significantly in recent years. • Content providers' share of international bandwidth demand grew from 5% to 69% between 2005 and 2021. • In recent years, content providers have increasingly chosen upstream vertical integration to provide for bandwidth requirements. • Empirical analysis reveals that content providers' investment is motivated by connecting proprietary data centers. • Potential medium to long-term implications of these trends are discussed.