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Zero-rating and vertical content foreclosure

Author

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  • Jeitschko, Thomas D.
  • Kim, Soo Jin
  • Yankelevich, Aleksandr

Abstract

We study zero-rating, a practice whereby an Internet service provider (ISP) that limits retail data consumption exempts certain content from that limit. This practice is particularly controversial when an ISP zero-rates its own vertically integrated content, because the data limit and ensuing overage charges impose an additional cost on rival content. We find that zero-rating and vertical integration are complementary in improving social welfare, though potentially at the expense of lower profit to an unaffiliated content provider. Moreover, allowing content providers to pay for zero-rating via a sponsored data plan raises welfare by inducing the ISP to zero-rate more content.

Suggested Citation

  • Jeitschko, Thomas D. & Kim, Soo Jin & Yankelevich, Aleksandr, 2019. "Zero-rating and vertical content foreclosure," DICE Discussion Papers 317, University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
  • Handle: RePEc:zbw:dicedp:317
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    References listed on IDEAS

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    6. 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.
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    Cited by:

    1. Axel Gautier & Robert Somogyi, 2018. "Prioritization vs Zero-Rating: Discrimination on the Internet," CESifo Working Paper Series 7185, CESifo Group Munich.

    More about this item

    Keywords

    Data Caps; Sponsored Data; Two-Sided Market; Vertical Content Foreclosure; Zero-Rating;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts

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