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Net Neutrality and Inflation of Traffic

Author

Listed:
  • Peitz, M.
  • Schütt, F.

    (Tilburg University, TILEC)

Abstract

Under strict net neutrality Internet service providers (ISPs) are required to carry data without any differentiation and at no cost to the content provider. We provide a simple framework with a monopoly ISP to evaluate the short-run effects of different net neutrality rules. Content differs in its sensitivity to delay. Content providers can use congestion control techniques to reduce delay for their content, but do not take into account the effect of their decisions on the aggregate volume of traffic. As a result, strict net neutrality often leads to socially inefficient allocation of traffic and traffic inflation. We show that piece-meal departures from net neutrality, such as transmission fees or prioritization based on sensitivity to delay, do not necessarily improve efficiency. However, the ISP implements the efficient allocation when allowed to introduce bandwidth tiering and charge for prioritized delivery.
(This abstract was borrowed from another version of this item.)
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Peitz, M. & Schütt, F., 2015. "Net Neutrality and Inflation of Traffic," Discussion Paper 2015-006, Tilburg University, Tilburg Law and Economic Center.
  • Handle: RePEc:tiu:tiutil:081fba8e-4966-4f4e-b114-18452b2f91c1
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    References listed on IDEAS

    as
    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.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Net neutrality; network congestion; telecommunications; quality of service;
    All these keywords.

    JEL classification:

    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software

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