Network neutrality and foreclosing market exchange

We analyse the effects of 'network neutrality' proposals that seek to foreclose or severely limit market transactions. Our model reveals that rules that prohibit efficient commercial transactions between content and broadband service providers could be bad for all participants – consumers would pay higher prices, the profits of the broadband service provider would decline, and the sales of internet content providers would also decline. Moreover by shifting costs to consumers that are more efficiently borne in the exchange between content and broadband providers, such rules may shift sales from content providers to the broadband provider's content affiliate.