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Net Neutrality, Foreclosure and the Fast Lane: An empirical study of the UK

Author

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  • Laura Nurski

    () (Center for Economic Studies, Faculty of Business and Economics, KU Leuven)

Abstract

Consumers buy internet access from Internet Service Providers (ISPs) to reach online content providers. Under net neutrality, an ISP is not allowed to discriminate between content providers, even though it might have an incentive to do so. An ISP might want to sell a “fast lane” to content providers or use quality degradation to foreclose content providers that compete with the ISP's own content. Discarding net neutrality will have two effects on consumers: (i) consumers will reoptimize their choice of online content, at constant ISP choices; and (ii) consumers will reoptimize their choice of ISP. I empirically investigate whether an ISP has an incentive to break net neutrality, taking into account both channels of consumer response. I combine a novel data set on UK household content and ISP choices with data on ISP presence in local markets, as well as speeds and prices. Preliminary results indicate that a fast lane increases consumers' surplus, industry revenues and advertising revenues. In contrast, foreclosure seems an unlikely scenario since it reduces the foreclosing ISP's revenues from selling broadband by more than it can recuperate through advertising on online content.

Suggested Citation

  • Laura Nurski, 2012. "Net Neutrality, Foreclosure and the Fast Lane: An empirical study of the UK," Working Papers 12-13, NET Institute.
  • Handle: RePEc:net:wpaper:1213
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    File URL: http://www.NETinst.org/Nurski_12-13.pdf
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    References listed on IDEAS

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    4. Jay Pil Choi & Byung-Cheol Kim, 2010. "Net neutrality and investment incentives," RAND Journal of Economics, RAND Corporation, vol. 41(3), pages 446-471.
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    Cited by:

    1. Martínez, Luis & Álvarez San-Jaime, Oscar & Markendahl, Jan, 2015. "Net neutrality principles and its impact on quality of experience based service differentiation in mobile networks," 2015 Regional ITS Conference, Los Angeles 2015 146319, International Telecommunications Society (ITS).
    2. José Francisco Tudón Maldonado, 2017. "Congestion v Content Provision in Net Neutrality: The Case of Amazon's Twitch.tv," 2017 Papers ptu168, Job Market Papers.
    3. Martinez, Luis & Alvarez, Oscar Alvarez & Markendahl, Jan, 2015. "Study of the potential impact of Quality-of-Experience based services on Net Neutrality principles," 26th European Regional ITS Conference, Madrid 2015 127168, International Telecommunications Society (ITS).

    More about this item

    Keywords

    Net neutrality; Foreclosure; Telecommunications;

    JEL classification:

    • L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media

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