The Internet comprises thousands of independently operated networks, interconnected using bilaterally negotiated data exchange agreements. The European Union (EU)’s General Data Protection Regulation (GDPR) imposes strict restrictions on handling of personal data of European Economic Area (EEA) residents. A close examination of the text of the law suggests significant cost to application firms. Available empirical evidence confirms reduction in data usage in the EEA relative to other markets. The authors investigate whether this decline in derived demand for data exchange impacts investment in interconnection by networks in the EEA relative to networks in non-EEA OECD countries. Their data consists of a large sample of interconnection agreements between networks globally in 2015–2019. All evidence estimates precisely zero effects: the number of observed agreements, the inferred agreement types, and the number of observed IP-address-level interconnection points per agreement. They also find economically small effects of the GDPR on the entry and the observed number of customers of networks. They conclude there is no visible short run consequence of the GDPR at the internet layer.
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