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Net Neutrality, Network Capacity, and Innovation at the Edges

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  • Jay Pil Choi
  • Doh†Shin Jeon
  • Byung†Cheol Kim

Abstract

We study how net neutrality regulations affect a high†bandwidth content provider (CP)'s investment incentives to enhance its quality of services in content delivery to end users. We find that the effects crucially depend on whether the CP's entry is constrained by the Internet service provider's network capacity. If the capacity is relatively large, the prioritization reduces the investment as CP's investment and prioritization form substitutes. With limited capacity, however, they become complements and the prioritization can facilitate the entry of congestion†sensitive content. Our analysis suggests that the optimal policy may call for potentially asymmetric regulations across mobile and fixed networks.

Suggested Citation

  • Jay Pil Choi & Doh†Shin Jeon & Byung†Cheol Kim, 2018. "Net Neutrality, Network Capacity, and Innovation at the Edges," Journal of Industrial Economics, Wiley Blackwell, vol. 66(1), pages 172-204, March.
  • Handle: RePEc:bla:jindec:v:66:y:2018:i:1:p:172-204
    DOI: 10.1111/joie.12161
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    8. Jay Pil Choi & Doh-Shin Jeon & Byung-Cheol Kim, 2015. "Net Neutrality, Business Models, and Internet Interconnection," American Economic Journal: Microeconomics, American Economic Association, vol. 7(3), pages 104-141, August.
    9. Robin S. Lee & Tim Wu, 2009. "Subsidizing Creativity through Network Design: Zero-Pricing and Net Neutrality," Journal of Economic Perspectives, American Economic Association, vol. 23(3), pages 61-76, Summer.
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    Cited by:

    1. Gautier, Axel & Somogyi, Robert, 2020. "Prioritization vs zero-rating: Discrimination on the internet," International Journal of Industrial Organization, Elsevier, vol. 73(C).
    2. Lorenzon, Emmanuel, 2022. "Zero-rating, content quality, and network capacity," Information Economics and Policy, Elsevier, vol. 58(C).
    3. Emmanuel LORENZON, 2020. "Zero Rating, Content Quality and Network Capacity," Bordeaux Economics Working Papers 2020-21, Bordeaux School of Economics (BSE).
    4. Joshua Gans, 2015. "Weak versus strong net neutrality," Journal of Regulatory Economics, Springer, vol. 47(2), pages 183-200, April.
    5. Edmond Baranes & Cuong Hung Vuong, 2020. "Investment in Quality Upgrade and Regulation of the Internet," CESifo Working Paper Series 8074, CESifo.
    6. Edmond Baranes & Cuong Hung Vuong, 2022. "Investment in quality upgrade and regulation of the internet," Journal of Regulatory Economics, Springer, vol. 61(1), pages 1-31, February.
    7. Bauer, Johannes M. & Bohlin, Erik, 2022. "Regulation and innovation in 5G markets," Telecommunications Policy, Elsevier, vol. 46(4).
    8. Saruta, Fuyuki, 2021. "Effects of Vertical Integration on Internet Service Providers' Zero-rating Choice," MPRA Paper 110288, University Library of Munich, Germany.
    9. Barrie R. Nault & Steffen Zimmermann, 2019. "Balancing Openness and Prioritization in a Two-Tier Internet," Information Systems Research, INFORMS, vol. 30(3), pages 745-763, September.
    10. Rossi, Maria Alessandra, 2022. "The advent of 5G and the non-discrimination principle," Telecommunications Policy, Elsevier, vol. 46(4).
    11. Jean-Christophe Poudou & Wilfried Sand-Zantman, 2022. "The Environmental Impact of Internet Regulation," Working Papers hal-03608708, HAL.
    12. Stocker Volker & Knieps Guenter, 2018. "Network Neutrality Through the Lens of Network Economics," Review of Network Economics, De Gruyter, vol. 17(3), pages 115-150, September.

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