Broadband User Discrimination and the Net Neutrality Debate

Hong Guo (), Subhajyoti Bandyopadhyay () and Hsing K. Cheng ()
Additional contact information
Hong Guo: Mendoza College of Business, University of Notre Dame
Subhajyoti Bandyopadhyay: Warrington College of Business Administration, University of Florida, http://www.cba.ufl.edu/isom/faculty/facultyinfo.asp?WEBID=2136
Hsing K. Cheng: Warrington College of Business Administration, University of Florida, http://www.cba.ufl.edu/isom/faculty/facultyinfo.asp?WEBID=257

No 09-13, Working Papers from NET Institute

Abstract: The net neutrality debate has brought out economic rationale for and against a variety of proposals of the broadband service providers to differentiate between different classes of users. Broadband users are characterized by the differing amounts of content they request online, as well as their valuation for such content. A broadband service provider (BSP) has two potential instruments for user discrimination – price discrimination and traffic prioritization (or degradation). We model six different pricing and prioritization options that cover many of the strategies that actual BSPs have adopted in the marketplace. By comparing these options, we find that imposing net neutrality increases the BSP?s profit if the BSP price discriminates different consumer groups. If net neutrality is not imposed, however, the BSP might still prefer a net neutrality outcome depending on the various parameter values. These and other results will be useful both for the broadband service providers as they mull over the introduction of the different pricing strategies and for policymakers who are dealing with the net neutrality issue.

Keywords: Net neutrality; Internet access pricing; congestion pricing; traffic prioritization; public policy; market regulation (search for similar items in EconPapers)
JEL-codes: D4 L5 L86 R4 (search for similar items in EconPapers)
Pages: 51 pages
Date: 2009-08, Revised 2009-08
New Economics Papers: this item is included in nep-com, nep-ict and nep-reg
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