The economics of network neutrality

Under the current regime for Internet access, "network neutrality, "parties are billed only by the Internet service provider (ISP) through which they connect to the Internet; pricing is not contingent on the content being transmitted. Recently, ISPs have proposed that content and applicati...

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Bibliographic Details
Published in:The Rand journal of economics 2012-12, Vol.43 (4), p.602-629
Main Authors: Economides, Nicholas, Hermalin, Benjamin E.
Format: Article
Language:English
Subjects:
Consumer surplus
Data bandwidth
Elasticity of demand
Fees
Fees & charges
Households
Impact analysis
Internet
Internet access
Internet service providers
Marginal costs
Marginal utility
Monopoly
Neutrality
Price discrimination
Pricing
Research and development
Residential areas
Studies
Traffic congestion
Transmission mechanism
Welfare
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Summary:Under the current regime for Internet access, "network neutrality, "parties are billed only by the Internet service provider (ISP) through which they connect to the Internet; pricing is not contingent on the content being transmitted. Recently, ISPs have proposed that content and applications providers pay them additional fees for accessing the ISPs' residential clients, as well as fees to prioritize certain content We analyze the private and social implications of such fees when the network is congested and more traffic implies greater delays. We derive conditions under which network neutrality would be welfare superior to any feasible scheme for prioritizing service.
ISSN:0741-6261
1756-2171
DOI:10.1111/1756-2171.12001