Asymmetric Neutrality Regulation and Innovation at the Edges: Fixed vs. Mobile Networks
AbstractWe study how net neutrality regulations affect high-bandwidth content providers’ investment incentives in quality of services (QoS). We find that the effects crucially depend on network capacity levels. With a limited network capacity, the prioritized delivery services are complements to content providers' investments and can facilitate entry of high-bandwidth content. By contrast, if the network capacity is large enough, the prioritized delivery and QoS investment are substitutes. In either case, the social welfare effects of the prioritized service is ambiguous. In the limited capacity case, the beneficial effects of entry by high-band width content should be weighed against the cost of increasing congestion for other existing content. In the high capacity case, the negative impact of reduced investment incentives can be counterbalanced by the benefit of improved traffic management. Our findings have important implications for the contrasting neutrality regulations across the Atlantic: US FCC treats mobile networks more leniently than fixed networks, while the EU treats them equally.
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Bibliographic InfoPaper provided by NET Institute in its series Working Papers with number 13-24.
Length: 33 pages
Date of creation: Oct 2013
Date of revision:
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Web page: http://www.NETinst.org/
Net neutrality; asymmetric regulation; quality of service; investment incentives; queuing; congestion; mobile/fixed Networks;
Find related papers by JEL classification:
- L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
- L5 - Industrial Organization - - Regulation and Industrial Policy
- O3 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-10-25 (All new papers)
- NEP-COM-2013-10-25 (Industrial Competition)
- NEP-INO-2013-10-25 (Innovation)
- NEP-MIC-2013-10-25 (Microeconomics)
- NEP-NET-2013-10-25 (Network Economics)
- NEP-ORE-2013-10-25 (Operations Research)
- NEP-REG-2013-10-25 (Regulation)
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