Wednesday, November 3, 2010
Network Neutrality and Congestion Sensitive Content Providers: Implications for Service Innovation, Broadband Investment and Regulation
Posted by D. Daniel Sokol
Jan Kraemer (Karlsruhe Institute of Technology, Institute of Information Systems and Management) and
Lukas Wiewiorra (Karlsruhe Institute of Technology, Institute of Information Systems and Management) address Network Neutrality and Congestion Sensitive Content Providers: Implications for Service Innovation, Broadband Investment and Regulation.
ABSTRACT: We consider a two-sided market model with a monopolistic Internet Service Provider (ISP), network congestion sensitive content providers (CPs), and Internet customers in order to study the impact of Quality-of-Service (QoS) tiering on service innovation, broadband investments, and welfare in comparison to network neutrality. We find that QoS tiering is the more efficient regime in the short-run. However it does not promote entry by new, congestion sensitive CPs, because the ISP can expropriate much of the CPs' surplus. In the long-run, QoS tiering may lead to more or less broadband capacity and welfare, depending on the competition-elasticity of CPs' revenues.