IDEAS home Printed from https://ideas.repec.org/p/bdp/wpaper/2015014.html
   My bibliography  Save this paper

Net Neutrality, Vertical Integration, and Competition Between Content Providers

Author

Listed:
  • Juliane Fudickar

    (Freie Universität Berlin)

Abstract

This paper investigates the effects of a net neutrality regulation on the competition between content providers and the investment incentives of the internet service provider. We consider a situation where the monopoly internet service provider is vertically integrated with one of the content providers, and content providers compete in prices. Without net neutrality the vertical integrated firm can prioritise the delivery of its own content. We find that, under prioritisation, the integrated internet service provider and consumers as a whole are unambiguously better off. The competing content providers might also be better off under prioritisation if the congestion intensity is high. From a social welfare perspective prioritisation is also desirable unless product differentiation and congestion intensity are low. Contrary to some claims by internet service providers, we find that investment incentives are not always higher under prioritisation.

Suggested Citation

  • Juliane Fudickar, 2015. "Net Neutrality, Vertical Integration, and Competition Between Content Providers," BDPEMS Working Papers 2015014, Berlin School of Economics.
    • Handle: RePEc:bdp:wpaper:2015014
    as

    Download full text from publisher

    File URL: https://repec.berlinschoolofeconomics.de/bdp/wpaper/pdf/WP_2015-14.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. M. Keith Chen & Barry J. Nalebuff, 2006. "One-Way Essential Complements," Cowles Foundation Discussion Papers 1588, Cowles Foundation for Research in Economics, Yale University.
    2. Jay Pil Choi & Byung‐Cheol Kim, 2010. "Net neutrality and investment incentives," RAND Journal of Economics, RAND Corporation, vol. 41(3), pages 446-471, September.
    3. Marc Bourreau & Frago Kourandi & Tommaso Valletti, 2015. "Net Neutrality with Competing Internet Platforms," Journal of Industrial Economics, Wiley Blackwell, vol. 63(1), pages 30-73, March.
    4. Economides, Nicholas & Tåg, Joacim, 2012. "Network neutrality on the Internet: A two-sided market analysis," Information Economics and Policy, Elsevier, vol. 24(2), pages 91-104.
    5. Rey, Patrick & Tirole, Jean, 2007. "A Primer on Foreclosure," Handbook of Industrial Organization, in: Mark Armstrong & Robert Porter (ed.), Handbook of Industrial Organization, edition 1, volume 3, chapter 33, pages 2145-2220, Elsevier.
    6. Nicholas Economides, 2007. "“Net Neutrality,” Non-Discrimination and Digital Distribution of Content Through the Internet," Working Papers 07-03, NET Institute.
    7. Hsing Kenneth Cheng & Subhajyoti Bandyopadhyay & Hong Guo, 2011. "The Debate on Net Neutrality: A Policy Perspective," Information Systems Research, INFORMS, vol. 22(1), pages 60-82, March.
    8. Nicholas Economides, 2007. "Economics of the Internet," Working Papers 07-1, New York University, Leonard N. Stern School of Business, Department of Economics.
    9. Nicholas Economides & Benjamin E. Hermalin, 2012. "The economics of network neutrality," RAND Journal of Economics, RAND Corporation, vol. 43(4), pages 602-629, December.
    10. Hermalin, Benjamin E. & Katz, Michael L., 2007. "The economics of product-line restrictions with an application to the network neutrality debate," Information Economics and Policy, Elsevier, vol. 19(2), pages 215-248, June.
    11. Duarte Brito & Pedro Pereira & João Vareda, 2013. "Network Neutrality under ISP duopoly: on the ability to assign capacity," CEFAGE-UE Working Papers 2013_19, University of Evora, CEFAGE-UE (Portugal).
    12. Whinston, Michael D, 1990. "Tying, Foreclosure, and Exclusion," American Economic Review, American Economic Association, vol. 80(4), pages 837-859, September.
    13. Keith M. Chen & Barry Nalebuff, 2006. "One-Way Essential Complements," Levine's Bibliography 321307000000000669, UCLA Department of Economics.
    14. Jan Krämer & Lukas Wiewiorra, 2012. "Network Neutrality and Congestion Sensitive Content Providers: Implications for Content Variety, Broadband Investment, and Regulation," Information Systems Research, INFORMS, vol. 23(4), pages 1303-1321, December.
    15. Schuett Florian, 2010. "Network Neutrality: A Survey of the Economic Literature," Review of Network Economics, De Gruyter, vol. 9(2), pages 1-15, June.
    16. Economides, Nicholas, 1998. "The incentive for non-price discrimination by an input monopolist," International Journal of Industrial Organization, Elsevier, vol. 16(3), pages 271-284, May.
    17. Mark Armstrong Author-Email: mark.armstrong@ucl.ac.uk Author-Workplace-Name: University College of London, 2006. "Competition in Two-Sided Markets," RAND Journal of Economics, The RAND Corporation, vol. 37(3), pages 668-691, Autumn.
    18. Dewenter Ralf & Rösch Jürgen, 2016. "Net Neutrality and the Incentives (Not) to Exclude Competitors," Review of Economics, De Gruyter, vol. 67(2), pages 209-229, August.
    19. repec:reg:rpubli:65 is not listed on IDEAS
    20. Hahn Robert W. & Wallsten Scott, 2006. "The Economics of Net Neutrality," The Economists' Voice, De Gruyter, vol. 3(6), pages 1-7, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jeitschko, Thomas D. & Kim, Soo Jin & Yankelevich, Aleksandr, 2018. "A cautionary note on using hotelling models in platform markets," DICE Discussion Papers 286, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    2. Broos, Sébastien & Gautier, Axel, 2017. "The exclusion of competing one-way essential complements: Implications for net neutrality," International Journal of Industrial Organization, Elsevier, vol. 52(C), pages 358-392.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Robert F. Easley & Hong Guo & Jan Krämer, 2018. "Research Commentary—From Net Neutrality to Data Neutrality: A Techno-Economic Framework and Research Agenda," Information Systems Research, INFORMS, vol. 29(2), pages 253-272, June.
    2. Economides, Nicholas & Tåg, Joacim, 2012. "Network neutrality on the Internet: A two-sided market analysis," Information Economics and Policy, Elsevier, vol. 24(2), pages 91-104.
    3. Briglauer, Wolfgang & Stocker, Volker & Stockhammer, Paul, 2019. "Ist Netzneutralität tatsächlich gut? Eine Neubewertung vor dem Hintergrund der Regulierung in den USA und in der EU sowie aktueller Forschungsergebnisse," Policy Notes 38, EcoAustria – Institute for Economic Research.
    4. Jan Krämer & Lukas Wiewiorra, 2012. "Network Neutrality and Congestion Sensitive Content Providers: Implications for Content Variety, Broadband Investment, and Regulation," Information Systems Research, INFORMS, vol. 23(4), pages 1303-1321, December.
    5. Njoroge Paul & Ozdaglar Asuman & Stier-Moses Nicolás E. & Weintraub Gabriel Y., 2014. "Investment in Two-Sided Markets and the Net Neutrality Debate," Review of Network Economics, De Gruyter, vol. 12(4), pages 355-402, February.
    6. Broos, Sébastien & Gautier, Axel, 2017. "The exclusion of competing one-way essential complements: Implications for net neutrality," International Journal of Industrial Organization, Elsevier, vol. 52(C), pages 358-392.
    7. Gautier, Axel & Somogyi, Robert, 2020. "Prioritization vs zero-rating: Discrimination on the internet," International Journal of Industrial Organization, Elsevier, vol. 73(C).
    8. Vogelsang Ingo, 2013. "The Endgame of Telecommunications Policy? A Survey," Review of Economics, De Gruyter, vol. 64(3), pages 193-270, December.
    9. Baake, Pio & Sudaric, Slobodan, 2018. "Net Neutrality, Prioritization and the Impact of Content Delivery Networks," Rationality and Competition Discussion Paper Series 102, CRC TRR 190 Rationality and Competition.
    10. Frago Kourandi & Jan Krämer & Tommaso Valletti, 2015. "Net Neutrality, Exclusivity Contracts, and Internet Fragmentation," Information Systems Research, INFORMS, vol. 26(2), pages 320-338, June.
    11. D'Annunzio, Anna & Russo, Antonio, 2015. "Net Neutrality and internet fragmentation: The role of online advertising," International Journal of Industrial Organization, Elsevier, vol. 43(C), pages 30-47.
    12. Peitz, Martin & Schuett, Florian, 2016. "Net neutrality and inflation of traffic," International Journal of Industrial Organization, Elsevier, vol. 46(C), pages 16-62.
    13. Baake, Pio & Sudaric, Slobodan, 2017. "Interconnection and Prioritization," 28th European Regional ITS Conference, Passau 2017 169446, International Telecommunications Society (ITS).
    14. Baake, Pio & Sudaric, Slobodan, 2019. "Net neutrality and CDN intermediation," Information Economics and Policy, Elsevier, vol. 46(C), pages 55-67.
    15. Dewenter Ralf & Rösch Jürgen, 2016. "Net Neutrality and the Incentives (Not) to Exclude Competitors," Review of Economics, De Gruyter, vol. 67(2), pages 209-229, August.
    16. Calzada, Joan & Tselekounis, Markos, 2018. "Net Neutrality in a hyperlinked Internet economy," International Journal of Industrial Organization, Elsevier, vol. 59(C), pages 190-221.
    17. Anna D'Annunzio & Antonio Russo, 2013. "Network Neutrality, Access to Content and Online Advertising," DIAG Technical Reports 2013-09, Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza".
    18. Baranes, Edmond, 2014. "The interplay between network investment and content quality: Implications to net neutrality on the Internet," Information Economics and Policy, Elsevier, vol. 28(C), pages 57-69.
    19. Reggiani, Carlo & Valletti, Tommaso, 2016. "Net neutrality and innovation at the core and at the edge," International Journal of Industrial Organization, Elsevier, vol. 45(C), pages 16-27.
    20. Pio Baake & Slobodan Sudaric, 2016. "Interconnection and Prioritization," Discussion Papers of DIW Berlin 1629, DIW Berlin, German Institute for Economic Research.

    More about this item

    Keywords

    Vertical integration; Network neutrality; Competition; Investment;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
    • L88 - Industrial Organization - - Industry Studies: Services - - - Government Policy

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bdp:wpaper:2015014. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Christian Reiter (email available below). General contact details of provider: https://edirc.repec.org/data/bdpemde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.