Net Neutrality, Foreclosure and the Fast Lane: An empirical study of the UK
AbstractConsumers buy internet access from Internet Service Providers (ISPs) to reach online content providers. Under net neutrality, an ISP is not allowed to discriminate between content providers, even though it might have an incentive to do so. An ISP might want to sell a “fast lane” to content providers or use quality degradation to foreclose content providers that compete with the ISP's own content. Discarding net neutrality will have two effects on consumers: (i) consumers will reoptimize their choice of online content, at constant ISP choices; and (ii) consumers will reoptimize their choice of ISP. I empirically investigate whether an ISP has an incentive to break net neutrality, taking into account both channels of consumer response. I combine a novel data set on UK household content and ISP choices with data on ISP presence in local markets, as well as speeds and prices. Preliminary results indicate that a fast lane increases consumers' surplus, industry revenues and advertising revenues. In contrast, foreclosure seems an unlikely scenario since it reduces the foreclosing ISP's revenues from selling broadband by more than it can recuperate through advertising on online content.
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Bibliographic InfoPaper provided by NET Institute in its series Working Papers with number 12-13.
Length: 30 pages
Date of creation: Sep 2012
Date of revision:
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Web page: http://www.NETinst.org/
Net neutrality; Foreclosure; Telecommunications;
Find related papers by JEL classification:
- L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
- L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
- L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-10-13 (All new papers)
- NEP-COM-2012-10-13 (Industrial Competition)
- NEP-MKT-2012-10-13 (Marketing)
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