The Economics of Free Internet Access
AbstractIn an increasing number of European countries, Internet service providers offer free Internet access. Telephone companies are willing to pay these providers based on the amount of traffic they generate. In this paper, we explain these phenomena. We argue that, by offering a contract that pays the provider a certain lump sum conditional on it providing free Internet access, the telephone company solves a double marginalization problem. We analyze this in a simple model in which only the Internet access market is studied, and in a richer model, where the regular telephone market is also taken into account.
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Bibliographic InfoArticle provided by Mohr Siebeck, Tübingen in its journal Journal of Institutional and Theoretical Economics.
Volume (Year): 157 (2001)
Issue (Month): 3 (September)
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- L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
- L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
- L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
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- C. Deligiorgi & A. Vavoulas & Ch. Michalakelis & D. Varoutas & Th. Sphicopoulos, 2007. "On the construction of price index and the definition of factors affecting tariffs of ADSL connections across Europe," Netnomics, Springer, vol. 8(1), pages 171-183, October.
- Fioramanti, Marco, 2005. "Free Internet access: When is it suitable?," Information Economics and Policy, Elsevier, vol. 17(3), pages 302-316, July.
- Rajeev Goel & Edward Hsieh & Michael Nelson & Rati Ram, 2006. "Demand elasticities for Internet services," Applied Economics, Taylor & Francis Journals, vol. 38(9), pages 975-980.
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