Broadband User Discrimination and the Net Neutrality Debate
AbstractThe net neutrality debate has brought out economic rationale for and against a variety of proposals of the broadband service providers to differentiate between different classes of users. Broadband users are characterized by the differing amounts of content they request online, as well as their valuation for such content. A broadband service provider (BSP) has two potential instruments for user discrimination – price discrimination and traffic prioritization (or degradation). We model six different pricing and prioritization options that cover many of the strategies that actual BSPs have adopted in the marketplace. By comparing these options, we find that imposing net neutrality increases the BSP?s profit if the BSP price discriminates different consumer groups. If net neutrality is not imposed, however, the BSP might still prefer a net neutrality outcome depending on the various parameter values. These and other results will be useful both for the broadband service providers as they mull over the introduction of the different pricing strategies and for policymakers who are dealing with the net neutrality issue.
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Bibliographic InfoPaper provided by NET Institute in its series Working Papers with number 09-13.
Length: 51 pages
Date of creation: Aug 2009
Date of revision: Aug 2009
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Web page: http://www.NETinst.org/
Net neutrality; Internet access pricing; congestion pricing; traffic prioritization; public policy; market regulation;
Find related papers by JEL classification:
- R4 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics
- D4 - Microeconomics - - Market Structure and Pricing
- L5 - Industrial Organization - - Regulation and Industrial Policy
- L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-10-24 (All new papers)
- NEP-COM-2009-10-24 (Industrial Competition)
- NEP-ICT-2009-10-24 (Information & Communication Technologies)
- NEP-REG-2009-10-24 (Regulation)
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