We explore the problem of modeling Internet connectivity at the Autonomous System (AS) level and present an economically-principled dynamic model that reproduces key features of the AS graph structure. We view the graph as the outcome of optimizing decisions made by each AS given its business model. In our model, nodes (representing ASs) arrive over time and choose and change providers to maximize their utility. Our formulation of AS utility includes revenue from an AS’s own generated demand for traffic, congestion and routing costs, as well as transfers to and from provider and customer ASs, respectively. Our model has the following features: it uses an empirically-motivated model of traffic demand (Chang, Jamin, Mao, Willinger, 2005) which considers the variation in demand with ASs’ business models and the graph of business relationships; it allows for nodes to revise their connections over time, in a fashion similar to the well-known ‘forest fire’ model (Leskovec, Kleinber...