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The interplay between network investment and content quality: Implications to net neutrality on the Internet

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  • Baranes, Edmond

Abstract

This paper studies the interplay between network investment and content quality on the Internet, and investigates the implications to the net neutrality regime. We assume a model in which a network operator provides access to consumers and content providers. The network operator offers two access technologies: an old technology (copper) and a new technology (fiber). Content providers sell both a basic content and a premium content depending on the network technology to which consumers subscribe. We consider two market segments: one in which the network operator only offers the old technology (copper), and the other in which both technologies are offered. The network operator can invest in the new technology to increase its market coverage. We show that a marginal network investment can be beneficial for content providers and increase the consumer surplus, and examine the impacts of the discriminatory regime. We also state that content quality produces contrasted effects in the investment from the network operator depending on how high the consumer valuation for premium content is compared to basic content and the substitutability between both technologies. Finally, high content quality can give incentives to the network operator to invest more in the new technology, and then create a greater positive effect of the discriminatory regime.

Suggested Citation

  • Baranes, Edmond, 2014. "The interplay between network investment and content quality: Implications to net neutrality on the Internet," Information Economics and Policy, Elsevier, vol. 28(C), pages 57-69.
  • Handle: RePEc:eee:iepoli:v:28:y:2014:i:c:p:57-69
    DOI: 10.1016/j.infoecopol.2014.07.002
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    References listed on IDEAS

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    1. Krämer, Jan & Wiewiorra, Lukas & Weinhardt, Christof, 2013. "Net neutrality: A progress report," Telecommunications Policy, Elsevier, vol. 37(9), pages 794-813.
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    3. Reggiani, Carlo & Valletti, Tommaso, 2016. "Net neutrality and innovation at the core and at the edge," International Journal of Industrial Organization, Elsevier, vol. 45(C), pages 16-27.
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    5. Bourreau, Marc & Cambini, Carlo & Doğan, Pınar, 2012. "Access pricing, competition, and incentives to migrate from “old” to “new” technology," International Journal of Industrial Organization, Elsevier, vol. 30(6), pages 713-723.
    6. Nicholas Economides & Benjamin E. Hermalin, 2012. "The economics of network neutrality," RAND Journal of Economics, RAND Corporation, vol. 43(4), pages 602-629, December.
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    8. Hermalin, Benjamin E. & Katz, Michael L., 2007. "The economics of product-line restrictions with an application to the network neutrality debate," Information Economics and Policy, Elsevier, vol. 19(2), pages 215-248, June.
    9. Krämer, Jan & Wiewiorra, Lukas, 2009. "Network neutrality and congestion sensitive content providers: Implications for content variety, broadband investment and regulation," MPRA Paper 42519, University Library of Munich, Germany, revised 15 Jan 2012.
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    Cited by:

    1. Jeitschko, Thomas D. & Kim, Soo Jin & Yankelevich, Aleksandr, 2018. "A cautionary note on using hotelling models in platform markets," DICE Discussion Papers 286, University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    2. Shin, Dong-Hee & Kim, Hyup (Henry) & Kim, Nam Cheol & Kim, So Jeong & Kim, Sungho & Kim, Guri, 2015. "Application of Actor-Network Theory to Network Neutrality in Korea," 26th European Regional ITS Conference, Madrid 2015 127176, International Telecommunications Society (ITS).
    3. Anna D'Annunzio & Pierfrancesco Reverberi, 2015. "Content providers and co-investment in broadband networks," DIAG Technical Reports 2015-05, Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza".
    4. repec:eee:iepoli:v:42:y:2018:i:c:p:1-10 is not listed on IDEAS

    More about this item

    Keywords

    Next generation network; Investment; Content quality; Net neutrality regime; Discriminatory regime;

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications

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