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How Does the Internet Industry Compare?

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In an earlier CircleID post (The ISP Industry: Concentrated or Diverse?) we discussed if the ISP industry is concentrated and concluded the industry is amazingly open and varied.

This time we try to identify criteria that make other economic sectors comparable to our own industry, using the global automotive manufacturing sector as an example to test our assumptions.

Comparing the Internet industry with other industries is interesting, because it is quite special in a number of ways: it is transparent, keeps detailed records and values a high level of industry self-regulation. It also enables organisations to serve a global market.

When looking at the automotive and ISP industries, it’s apparent that even though there are many dissimilarities, they have a number of features in common too:

  • Both the ISP and the automotive industry are characterised by economies of scale, which enable individual producers to effectively serve the global marketplace.
  • Consequently, large producers in both sectors are typically engaged in cross-border customer-provider relationships in multiple regional and national economies.

In the image below you can see the status of the ISP industry in the RIPE NCC service region (Europe, Middle East and parts of Central Asia) in 2008 (left) compared with the automotive industry in 2008 (right). [footnote: Note that the number of organisations that received resources from the RIPE NCC has grown significantly since 2008 as you can see in the previous article, but we only have data for the automotive industry up until 2008.]

At the end of 2008, 100% of the IPv4 address space allocated or assigned by the RIPE NCC before that time was divided between 6,208 separate institutions, including 5,698 that were established after 31 December 1997.

In 2008, 98.6% of the global automotive production was divided between 49 separate manufacturers, including 18 that were not listed in 1998, and four that were established after 31 December 1997.

Whereas the ISP industry shows many new entrants and also a lot of “up” and “down” movement over the last ten years, there wasn’t much change in the automotive industry.

It is quite normal for industries to show a certain level of concentration. And concentration, often illustrated as a pyramid, is not bad as such. It only becomes problematic when there is no movement inside the pyramid and when organisations cannot move up or down based on how well or how badly they are performing.

Another important aspect is transparency and peer pressure. If it is not clear anymore how decisions are made and based on which criteria organisations can move around in the system, it will become locked and eventually break down just like recently happened in the banking industry—more about that in another post.

For further information, please refer to the background article on RIPE Labs: How Does the Internet Industry Compare

By Daniel Karrenberg, Chief Scientist at the RIPE NCC

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