IDEAS home Printed from https://ideas.repec.org/p/unl/unlfep/wp627.html
   My bibliography  Save this paper

Zero-rating, network effects, and capacity investments

Author

Listed:
  • Steffen Hoernig; Francisco Monteiro

Abstract

We consider internet service providers? incentives to zero-rate, i.e. do not count towards data allowances, the consumption of certain services, in the absence of payments from content providers. In a general model with various types of network effects, service substitutes or complements, monopoly and duopoly, we show that ISPs adopt zero-rating and that it increases consumer surplus and total welfare if network effects are strong enough. Capacity investment increases (decreases) with network effects if services are complements (substitutes). Under competition, the decision to zero-rate depends the residual network effect, which includes the impacts of spillovers and brand differentiation. JEL codes: D21, L51, L96

Suggested Citation

  • Steffen Hoernig; Francisco Monteiro, 2018. "Zero-rating, network effects, and capacity investments," FEUNL Working Paper Series wp627, Universidade Nova de Lisboa, Faculdade de Economia.
  • Handle: RePEc:unl:unlfep:wp627
    as

    Download full text from publisher

    File URL: http://fesrvsd.fe.unl.pt/WPFEUNL/WP2018/Wp627.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. repec:eee:telpol:v:42:y:2018:i:7:p:501-513 is not listed on IDEAS
    2. 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.
    3. SOMOGYI, Robert, 2016. "The Economics of Zero-Rating and Net Neutrality," CORE Discussion Papers 2016047, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    4. Hoernig, Steffen, 2014. "Competition between multiple asymmetric networks: Theory and applications," International Journal of Industrial Organization, Elsevier, vol. 32(C), pages 57-69.
    5. repec:eee:indorg:v:58:y:2018:i:c:p:31-62 is not listed on IDEAS
    6. Schnurr, Daniel & Wiewiorra, Lukas, 2018. "Bit-by-Bit Towards Unlimited: An Analysis of Zero Rating and Sponsored Data Practices of Internet Service Providers," 29th European Regional ITS Conference, Trento 2018 184965, International Telecommunications Society (ITS).
    7. 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.
    8. repec:kap:revind:v:50:y:2017:i:4:d:10.1007_s11151-016-9555-7 is not listed on IDEAS
    9. Krämer, Jan & Peitz, Martin, 2018. "A fresh look at zero-rating," Telecommunications Policy, Elsevier, vol. 42(7), pages 501-513.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    zero-rating; network effects; net neutrality; capacity investment;

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:unl:unlfep:wp627. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Susana Lopes). General contact details of provider: http://edirc.repec.org/data/feunlpt.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.