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Net neutrality and asymmetric platform competition

Author

Listed:
  • Marc Bourreau

    (Telecom ParisTech)

  • Romain Lestage

    (Central University of Finance and Economics)

Abstract

In this paper we analyze the interplay between access to the last-mile network and net neutrality in the market for Internet access. We consider two competing Internet service providers (ISPs), which act as platforms between Internet users and content providers (CPs). One of the ISPs is vertically integrated and provides the other (non-integrated) ISP with access to its last-mile network. We study the impact of the access price on the termination fees charged by the ISPs to CPs for carrying their traffic. First, we show that the termination fee set by the integrated ISP decreases with the access price, whereas the termination fee of the non-integrated ISP can either increase or decrease with it. Second, we show that there exists a negative relationship (“waterbed effect”) between the access price and the total termination fee paid by the CPs. As a consequence, it may be socially optimal for the regulator to set the access price above cost when termination fees are left to the market.

Suggested Citation

  • Marc Bourreau & Romain Lestage, 2019. "Net neutrality and asymmetric platform competition," Journal of Regulatory Economics, Springer, vol. 55(2), pages 140-171, April.
    • Handle: RePEc:kap:regeco:v:55:y:2019:i:2:d:10.1007_s11149-019-09380-1
    DOI: 10.1007/s11149-019-09380-1
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    Cited by:

    1. Saruta, Fuyuki, 2021. "Effects of Vertical Integration on Internet Service Providers' Zero-rating Choice," MPRA Paper 110288, University Library of Munich, Germany.
    2. Saruta, Fuyuki, 2022. "Effects of vertical integration on internet service providers’ zero-rating choice," Information Economics and Policy, Elsevier, vol. 61(C).
    3. Szabó, Andrea & Pham, Vinh, 2022. "Net neutrality and consumer demand in the video on-demand market," Information Economics and Policy, Elsevier, vol. 61(C).
    4. Turgut Erkul & Sencer Ecer, 2022. "Net Neutrality in the Content Provision and Internet Service Provision Markets," Istanbul Journal of Economics-Istanbul Iktisat Dergisi, Istanbul University, Faculty of Economics, vol. 72(72-2), pages 689-724, December.
    5. Calzada, Joan & Tselekounis, Markos, 2018. "Net Neutrality in a hyperlinked Internet economy," International Journal of Industrial Organization, Elsevier, vol. 59(C), pages 190-221.

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    More about this item

    Keywords

    Net neutrality; Access regulation; Internet access; Two-sided markets;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L5 - Industrial Organization - - Regulation and Industrial Policy
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications

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