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Net neutrality, Network capacity and Innovation at the Edges

Author

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

Abstract

We study how net neutrality regulations affect a high-bandwidth content provider (CP)'s investment incentives to enhance its quality of services (QoS) in content delivery to end users. We find that the effects crucially depend on whether the CP's entry decision is constrained by the Internet service provider (ISP)'s network capacity. If capacity is relatively large, prioritized services reduce the QoS investment as they become substitutes, but improve trafic management. With limited capacity, by contrast, prioritized delivery services are complementary to the CP's investments and can facilitate entry of congestionsensitive content; however, this creates more congestion for other existing content. Our analysis suggests that the optimal policy may call for potentially asymmetric regulations across mobile and fixed networks.

Suggested Citation

  • Choi, Jay Pil & Jeon, Doh-Shin & Kim, Byung-Cheol, 2014. "Net neutrality, Network capacity and Innovation at the Edges," TSE Working Papers 14-521, Toulouse School of Economics (TSE), revised Jul 2017.
  • Handle: RePEc:tse:wpaper:28412
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    File URL: https://www.tse-fr.eu/sites/default/files/TSE/documents/doc/wp/io/wp_tse_521.pdf
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    References listed on IDEAS

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    1. Reggiani, Carlo & Valletti, Tommaso, 2016. "Net neutrality and innovation at the core and at the edge," International Journal of Industrial Organization, Elsevier, vol. 45(C), pages 16-27.
    2. 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.
    3. Hsing Kenneth Cheng & Subhajyoti Bandyopadhyay & Hong Guo, 2011. "The Debate on Net Neutrality: A Policy Perspective," Information Systems Research, INFORMS, vol. 22(1), pages 60-82, March.
    4. Peitz, Martin & Schuett, Florian, 2016. "Net neutrality and inflation of traffic," International Journal of Industrial Organization, Elsevier, vol. 46(C), pages 16-62.
    5. Schuett Florian, 2010. "Network Neutrality: A Survey of the Economic Literature," Review of Network Economics, De Gruyter, vol. 9(2), pages 1-15, June.
    6. Musacchio John & Schwartz Galina & Walrand Jean, 2009. "A Two-Sided Market Analysis of Provider Investment Incentives with an Application to the Net-Neutrality Issue," Review of Network Economics, De Gruyter, vol. 8(1), pages 1-18, March.
    7. Jay Pil Choi & Doh-Shin Jeon & Byung-Cheol Kim, 2015. "Net Neutrality, Business Models, and Internet Interconnection," American Economic Journal: Microeconomics, American Economic Association, vol. 7(3), pages 104-141, August.
    8. 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.
    9. Bruno Jullien & Wilfried Sand-Zantman, 2014. "Pricing Internet Traffic: Exclusion, Signalling and Screening," CESifo Working Paper Series 4709, CESifo Group Munich.
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    Cited by:

    1. Joshua Gans, 2015. "Weak versus strong net neutrality," Journal of Regulatory Economics, Springer, vol. 47(2), pages 183-200, April.

    More about this item

    Keywords

    Net neutrality; network capacity; entry; quality of services (QoS); externalities; investments;

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