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The exclusion of competing one-way essential complements: Implications for net neutrality

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  • Broos, Sébastien
  • Gautier, Axel

Abstract

We analyze the incentives of internet service providers (ISPs) to break net neutrality by excluding competing one-way essential complements, i.e. internet applications competing with their own products. A typical example is the exclusion of VoIP applications by telecom companies offering internet and voice services. A monopoly ISP may want to exclude a competing internet app if it is of inferior quality and the ISP cannot ask for a surcharge for its use. Competition between ISPs never leads to full app exclusion but it may lead to a fragmented internet where only one ISP offers the application. We show that, both in monopoly and duopoly, prohibiting the exclusion of the app and surcharges for its use does not always improve welfare.

Suggested Citation

  • Broos, Sébastien & Gautier, Axel, 2017. "The exclusion of competing one-way essential complements: Implications for net neutrality," International Journal of Industrial Organization, Elsevier, vol. 52(C), pages 358-392.
  • Handle: RePEc:eee:indorg:v:52:y:2017:i:c:p:358-392
    DOI: 10.1016/j.ijindorg.2017.03.003
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    References listed on IDEAS

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    Cited by:

    1. Marc Bourreau & Romain Lestage, 2019. "Net neutrality and asymmetric platform competition," Journal of Regulatory Economics, Springer, vol. 55(2), pages 140-171, April.
    2. Axel Gautier & Robert Somogyi, 2018. "Prioritization vs Zero-Rating: Discrimination on the Internet," CESifo Working Paper Series 7185, CESifo Group Munich.
    3. Vogelsang Ingo, 2018. "Net Neutrality Regulation: Much Ado about Nothing?," Review of Network Economics, De Gruyter, vol. 17(3), pages 225-243, September.
    4. repec:eee:indorg:v:59:y:2018:i:c:p:190-221 is not listed on IDEAS
    5. repec:eee:telpol:v:42:y:2018:i:7:p:514-529 is not listed on IDEAS
    6. repec:bpj:rneart:v:17:y:2018:i:3:p:151-173:n:1 is not listed on IDEAS

    More about this item

    Keywords

    Net neutrality; Foreclosure; One-way essential complements;

    JEL classification:

    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • 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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