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Network Neutrality and Congestion Sensitive Content Providers: Implications for Service Innovation, Broadband Investment and Regulation

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Abstract

We consider a two-sided market model with a monopolistic Internet Service Provider (ISP), network congestion sensitive content providers (CPs), and Internet customers in order to study the impact of Quality-of-Service (QoS) tiering on service innovation, broadband investments, and welfare in comparison to network neutrality. We find that QoS tiering is the more efficient regime in the short-run. However it does not promote entry by new, congestion sensitive CPs, because the ISP can expropriate much of the CPs' surplus. In the long-run, QoS tiering may lead to more or less broadband capacity and welfare, depending on the competition-elasticity of CPs' revenues.

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File URL: http://www.netinst.org/Kramer_Wiewiorra_10-09.pdf
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Bibliographic Info

Paper provided by NET Institute in its series Working Papers with number 10-09.

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Length: 43 pages
Date of creation: Sep 2010
Date of revision: Sep 2010
Handle: RePEc:net:wpaper:1009

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Web page: http://www.NETinst.org/

Related research

Keywords: Telecommunications; Net Neutrality; Quality of Service; Innovation; Investment; Regulation;

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Cited by:
  1. Nicholas Economides & Joacim Tåg, 2007. "Net Neutrality on the Internet: A Two-sided Market Analysis," Working Papers 07-45, NET Institute, revised Nov 2007.
  2. Nicholas Economides & Benjamin Hermalin, 2013. "The Strategic Use of Download Limits by a Monopoly Platform," Working Papers 13-26, NET Institute.
  3. Baranes, Edmond & Poudou, Jean-Christophe, 2011. "Internet access and investment incentives for broadband service providers," 22nd European Regional ITS Conference, Budapest 2011: Innovative ICT Applications - Emerging Regulatory, Economic and Policy Issues 52196, International Telecommunications Society (ITS).

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