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Net neutrality, Network capacity and Innovation at the Edges

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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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    10. 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.
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    Cited by:

    1. Saruta, Fuyuki, 2021. "Effects of Vertical Integration on Internet Service Providers' Zero-rating Choice," MPRA Paper 110288, University Library of Munich, Germany.
    2. Gautier, Axel & Somogyi, Robert, 2020. "Prioritization vs zero-rating: Discrimination on the internet," International Journal of Industrial Organization, Elsevier, vol. 73(C).
    3. Axel Gautier & Jean-Christophe Poudou & Michel Roland, 2022. "Net Neutrality and Universal Service Obligations," Working Papers hal-03609917, HAL.
    4. Lorenzon, Emmanuel, 2022. "Zero-rating, content quality, and network capacity," Information Economics and Policy, Elsevier, vol. 58(C).
    5. Edmond Baranes & Cuong Hung Vuong, 2020. "Investment in Quality Upgrade and Regulation of the Internet," CESifo Working Paper Series 8074, CESifo.
    6. Edmond Baranes & Cuong Hung Vuong, 2022. "Investment in quality upgrade and regulation of the internet," Journal of Regulatory Economics, Springer, vol. 61(1), pages 1-31, February.
    7. Bryson, Joanna J. & Malikova, Helena & Garbe, Lisa & Backovsky, David, 2023. "Big Telcos Aren’t Necessarily Better: A Case Study of EU versus US Market Concentration," SocArXiv m42uh, Center for Open Science.
    8. Poudou, Jean-Christophe & Sand-Zantman, Wilfried, 2023. "The environmental impact of Internet regulation," Information Economics and Policy, Elsevier, vol. 65(C).
    9. Saruta, Fuyuki, 2022. "Effects of vertical integration on internet service providers’ zero-rating choice," Information Economics and Policy, Elsevier, vol. 61(C).
    10. Stocker Volker & Knieps Guenter, 2018. "Network Neutrality Through the Lens of Network Economics," Review of Network Economics, De Gruyter, vol. 17(3), pages 115-150, September.
    11. Emmanuel LORENZON, 2020. "Zero Rating, Content Quality and Network Capacity," Bordeaux Economics Working Papers 2020-21, Bordeaux School of Economics (BSE).
    12. Joshua Gans, 2015. "Weak versus strong net neutrality," Journal of Regulatory Economics, Springer, vol. 47(2), pages 183-200, April.
    13. Bauer, Johannes M. & Bohlin, Erik, 2022. "Regulation and innovation in 5G markets," Telecommunications Policy, Elsevier, vol. 46(4).
    14. Rossi, Maria Alessandra, 2022. "The advent of 5G and the non-discrimination principle," Telecommunications Policy, Elsevier, vol. 46(4).
    15. Kim, Jeong-Yoo, 2023. "Prioritization between asymmetric content providers," Information Economics and Policy, Elsevier, vol. 62(C).
    16. Barrie R. Nault & Steffen Zimmermann, 2019. "Balancing Openness and Prioritization in a Two-Tier Internet," Information Systems Research, INFORMS, vol. 30(3), pages 745-763, September.

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    Keywords

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