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Network neutrality and congestion sensitive content providers: Implications for content variety, broadband investment and regulation

Author

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  • Krämer, Jan
  • Wiewiorra, Lukas

Abstract

We study departures from network neutrality through implementing a Quality of Service tiering regime in which an ISP charges for prioritization on a non-discriminatory basis. We find that Quality of Service tiering may be more efficient in the short run, because it better allocates the existing network capacity, and in the long run, because it provides higher investment incentives due to the increased demand for priority services by the entry of new congestion sensitive content providers. Which network regime is the most efficient depends on the distribution of congestion sensitivity among content providers, but a guideline is that the regime that provides higher incentives for infrastructure investments is more efficient in the long run.

Suggested Citation

  • Krämer, Jan & Wiewiorra, Lukas, 2009. "Network neutrality and congestion sensitive content providers: Implications for content variety, broadband investment and regulation," MPRA Paper 42519, University Library of Munich, Germany, revised 15 Jan 2012.
  • Handle: RePEc:pra:mprapa:42519
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    File URL: https://mpra.ub.uni-muenchen.de/42519/2/MPRA_paper_42519.pdf
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    References listed on IDEAS

    as
    1. Jay Pil Choi & Byung-Cheol Kim, 2010. "Net neutrality and investment incentives," RAND Journal of Economics, RAND Corporation, vol. 41(3), pages 446-471.
    2. repec:reg:rpubli:214 is not listed on IDEAS
    3. Foros, Oystein & Kind, Hans Jarle & Sorgard, Lars, 2002. "Access Pricing, Quality Degradation, and Foreclosure in the Internet," Journal of Regulatory Economics, Springer, vol. 22(1), pages 59-83, July.
    4. Hermalin, Benjamin E. & Katz, Michael L., 2007. "The economics of product-line restrictions with an application to the network neutrality debate," Information Economics and Policy, Elsevier, vol. 19(2), pages 215-248, June.
    5. Uri Ronnen, 1991. "Minimum Quality Standards, Fixed Costs, and Competition," RAND Journal of Economics, The RAND Corporation, vol. 22(4), pages 490-504, Winter.
    6. Dou, Wenyu, 2004. "Will Internet Users Pay for Online Content?," Journal of Advertising Research, Cambridge University Press, vol. 44(04), pages 349-359, December.
    7. 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.
    8. Schuett Florian, 2010. "Network Neutrality: A Survey of the Economic Literature," Review of Network Economics, De Gruyter, vol. 9(2), pages 1-15, June.
    9. Economides, Nicholas, 1998. "The incentive for non-price discrimination by an input monopolist," International Journal of Industrial Organization, Elsevier, vol. 16(3), pages 271-284, May.
    10. repec:rje:randje:v:37:y:2006:3:p:645-667 is not listed on IDEAS
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    12. Crawford, Gregory S & Shum, Matthew, 2007. "Monopoly Quality Degradation and Regulation in Cable Television," Journal of Law and Economics, University of Chicago Press, vol. 50(1), pages 181-219, February.
    13. Hahn Robert W. & Wallsten Scott, 2006. "The Economics of Net Neutrality," The Economists' Voice, De Gruyter, vol. 3(6), pages 1-7, June.
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    Citations

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    Cited by:

    1. Marc Bourreau & Frago Kourandi & Tommaso Valletti, 2015. "Net Neutrality with Competing Internet Platforms," Journal of Industrial Economics, Wiley Blackwell, vol. 63(1), pages 30-73, March.
    2. Peitz, Martin & Reisinger, Markus, 2014. "The Economics of Internet Media," Working Papers 14-23, University of Mannheim, Department of Economics.
    3. Shane Greenstein & Martin Peitz & Tommaso Valletti, 2016. "Net Neutrality: A Fast Lane to Understanding the Trade-Offs," Journal of Economic Perspectives, American Economic Association, vol. 30(2), pages 127-150, Spring.
    4. Juliane Fudickar, 2015. "Net Neutrality, Vertical Integration, and Competition Between Content Providers," Working Papers 2015014, Berlin Doctoral Program in Economics and Management Science (BDPEMS).
    5. repec:kap:revind:v:50:y:2017:i:4:d:10.1007_s11151-016-9554-8 is not listed on IDEAS
    6. Baake, Pio & Sudaric, Slobodan, 2018. "Net Neutrality, Prioritization and the Impact of Content Delivery Networks," Rationality and Competition Discussion Paper Series 102, CRC TRR 190 Rationality and Competition.
    7. Jan Krämer & Lukas Wiewiorra, 2015. "When ‘Just’ is Just Not Enough," Business & Information Systems Engineering: The International Journal of WIRTSCHAFTSINFORMATIK, Springer;Gesellschaft für Informatik e.V. (GI), vol. 57(5), pages 325-338, October.
    8. Jullien, Bruno & Sand-Zantman, Wilfried, 2018. "Internet regulation, two-sided pricing, and sponsored data," International Journal of Industrial Organization, Elsevier, vol. 58(C), pages 31-62.
    9. repec:kap:netnom:v:18:y:2017:i:1:d:10.1007_s11066-017-9114-x is not listed on IDEAS
    10. Peitz, Martin & Schuett, Florian, 2016. "Net neutrality and inflation of traffic," International Journal of Industrial Organization, Elsevier, vol. 46(C), pages 16-62.
    11. Pio Baake & Slobodan Sudaric, 2016. "Interconnection and Prioritization," Discussion Papers of DIW Berlin 1629, DIW Berlin, German Institute for Economic Research.
    12. Baranes, Edmond, 2014. "The interplay between network investment and content quality: Implications to net neutrality on the Internet," Information Economics and Policy, Elsevier, vol. 28(C), pages 57-69.
    13. Gaivoronski, Alexei A. & Nesse, Per-Jonny & Østerbo, Olav-Norvald & Lønsethagen, Håkon, 2016. "Risk-balanced dimensioning and pricing of End-to-End differentiated services," European Journal of Operational Research, Elsevier, vol. 254(2), pages 644-655.
    14. Sedlmeir, Joachim & Hopf, Stefan & Neuburger, Rahild & Picot, Arnold, 2017. "Convergent Digital Infrastructures and the Role of (Net-)Neutrality," 28th European Regional ITS Conference, Passau 2017 169497, International Telecommunications Society (ITS).
    15. Baake, Pio & Sudaric, Slobodan, 2017. "Interconnection and Prioritization," 28th European Regional ITS Conference, Passau 2017 169446, International Telecommunications Society (ITS).
    16. Jullien, Bruno & Sand-Zantman, Wilfried, 2014. "Pricing Internet Traffic: Exclusion, Signalling and Screening," CEPR Discussion Papers 9896, C.E.P.R. Discussion Papers.
    17. 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

    Telecommunications; Internet; Net Neutrality; Network Congestion; Two-Sided Market; Quality of Service; Innovation; Investment; Regulation; Internet Freedom Preservation Act;

    JEL classification:

    • L5 - Industrial Organization - - Regulation and Industrial Policy
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications
    • D4 - Microeconomics - - Market Structure, Pricing, and Design

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