The impact of the General Data Protection Regulation on internet interconnection
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. We investigate whether this decline in derived demand for data exchange impacts EEA networks’ decisions to interconnect relative to those of non-EEA OECD networks. Our data consists of a large sample of interconnection agreements between networks globally in 2015–2019. All evidence estimates zero effects: the number of observed agreements, the inferred agreement types, and the number of observed IP-address-level inter-connection points per agreement. We also find economically small effects of the GDPR on the entry and the observed number of customers of networks. We conclude there is no visible short run effects of the GDPR on these measures at the internet layer.