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Internet Interconnection and Network Neutrality

  • Choi, Jay
  • Jeon, Doh-Shin
  • Kim, Byung-Cheol

We analyze competition between interconnected networks when content is heterogeneous in its sensitivity to delivery quality. In a two-sided market framework, we characterize the equilibrium in a neutral network constrained to offer the same quality and assess the impact of such a constraint vis-à-vis a non-neutral network where Internet service providers (ISPs) are allowed to engage in second degree price discrimination with a menu of quality-price pairs. We find that the merit of net neutrality regulation depends crucially on content providers' business models. More generally, our analysis can be considered as a contribution to the literature on second-degree price discrimination in two-sided platform markets.

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Paper provided by Institut d'Économie Industrielle (IDEI), Toulouse in its series IDEI Working Papers with number 753.

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Date of creation: Nov 2012
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Publication status: Published in American Economic Journal: Microeconomics, 2015.
Handle: RePEc:ide:wpaper:26549
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  1. 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.
  2. Hurkens, Sjaak & Jeon, Doh-Shin, 2012. "Promoting network competition by regulating termination charges," International Journal of Industrial Organization, Elsevier, vol. 30(6), pages 541-552.
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