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Network Neutrality, Access to Content and Online Advertising

Author

Listed:
  • Anna D'Annunzio

    () (Toulouse School of Economics (GREMAQ) and Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza")

  • Antonio Russo

    (RSCAS, European University Institute)

Abstract

We investigate possible effects of network neutrality regulation on the distribution of content in the Internet. We model a two-sided market, where consumers and advertisers interact through Content Providers (CPs), and CPs and consumers through Internet Service Providers (ISPs). Multiple impressions of an ad on a consumer are partially wasteful. Thus, equilibrium ad rates decrease with the number of CPs consumers can browse. Under network neutrality, CPs can connect to any ISP for free, while in the unregulated regime they have to pay a (non-discriminatory) access fee set by the ISP.We show that universal distribution of content is always an equilibrium with net neutrality regulation. Instead, in the unregulated regime, ISPs can use access fees to rule out universal distribution when it is not protable, i.e. when repeated impressions of an ad rapidly lose value and consumers care for content availability to a small extent. We also nd that the unregulated regime is never superior to net neutrality from a welfare point of view. Consumer and advertiser surplus are weakly higher under net neutrality. ISPs are unambiguously better o in the unregulated regime, while CPs are unambiguously worse off.

Suggested Citation

  • Anna D'Annunzio & Antonio Russo, 2013. "Network Neutrality, Access to Content and Online Advertising," DIAG Technical Reports 2013-09, Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza".
  • Handle: RePEc:aeg:report:2013-09
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    network neutrality; two-sided markets; Internet; advertising; fragmentation;

    JEL classification:

    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • 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

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