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Network Neutrality and Quality of Service: A two-sided market analysis

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  • Köksal, Emin

Abstract

In this paper, we examine welfare implications of switching from a neutrality regime to a network management regime. While in the former a network provider or an integrated ISP should transmit data with a-bit-is-a-bit principle, in the latter it is allowed to differentiate its connection quality considering economic value of data packets transmitted from content or application providers to end-users. The differentiation indicates allowing the ISP to apply QoS arrangements for quality-sensitive contents or applications. The above issues are first examined with a model in which there is a monopolist ISP, and later it is extended through introducing duopoly competition. Our results refer some potential gains that can be captured through network management regime. Although the overall effect of deviation from neutrality regime on total surplus may not defined clearly, both in monopoly and in duopoly models we have found that end-users and quality-sensitive content or application providers benefit from network management regime, in case of enough increase in quality of connection offered by ISP(s).And, regular content or application providers suffer with decreasing connection quality because of fixed network capacity.

Suggested Citation

  • Köksal, Emin, 2010. "Network Neutrality and Quality of Service: A two-sided market analysis," 21st European Regional ITS Conference, Copenhagen 2010: Telecommunications at new crossroads - Changing value configurations, user roles, and regulation 43, International Telecommunications Society (ITS).
  • Handle: RePEc:zbw:itse10:43
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    File URL: https://www.econstor.eu/bitstream/10419/44439/1/43_koeksal.pdf
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    References listed on IDEAS

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    1. Mark Armstrong, 2006. "Competition in two‐sided markets," RAND Journal of Economics, RAND Corporation, vol. 37(3), pages 668-691, September.
    2. Jean-Charles Rochet & Jean Tirole, 2014. "Platform Competition in Two-Sided Markets," CPI Journal, Competition Policy International, vol. 10.
    3. Jay Pil Choi & Byung-Cheol Kim, 2010. "Net neutrality and investment incentives," RAND Journal of Economics, RAND Corporation, vol. 41(3), pages 446-471.
    4. Hermalin, Benjamin E. & Katz, Michael L., 2007. "The economics of product-line restrictions with an application to the network neutrality debate," Information Economics and Policy, Elsevier, vol. 19(2), pages 215-248, June.
    5. Jörn Kruse, 2008. "Network Neutrality and Quality of Service," Intereconomics: Review of European Economic Policy, Springer;German National Library of Economics;Centre for European Policy Studies (CEPS), vol. 43(1), pages 25-30, January.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Telecommunications; Internet; Network Neutrality; Network Management Two-Sided Market; Quality of Service;

    JEL classification:

    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications

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