Asymmetric Neutrality Regulation and Innovation at the Edges: Fixed vs. Mobile Networks

Jay Choi, Doh-Shin Jeon and Byung-Cheol Kim

No 13-24, Working Papers from NET Institute

Abstract: We study how net neutrality regulations affect high-bandwidth content providers’ investment incentives in quality of services (QoS). We find that the effects crucially depend on network capacity levels. With a limited network capacity, the prioritized delivery services are complements to content providers' investments and can facilitate entry of high-bandwidth content. By contrast, if the network capacity is large enough, the prioritized delivery and QoS investment are substitutes. In either case, the social welfare effects of the prioritized service is ambiguous. In the limited capacity case, the beneficial effects of entry by high-band width content should be weighed against the cost of increasing congestion for other existing content. In the high capacity case, the negative impact of reduced investment incentives can be counterbalanced by the benefit of improved traffic management. Our findings have important implications for the contrasting neutrality regulations across the Atlantic: US FCC treats mobile networks more leniently than fixed networks, while the EU treats them equally.

Keywords: Net neutrality; asymmetric regulation; quality of service; investment incentives; queuing; congestion; mobile/fixed Networks (search for similar items in EconPapers)
JEL-codes: L1 L5 O3 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2013-10
New Economics Papers: this item is included in nep-com, nep-ino, nep-mic, nep-net, nep-ore and nep-reg
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Citations: View citations in EconPapers (13)

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Working Paper: Asymmetric Neutrality Regulation and Innovation at the Edges: Fixed vs. Mobile Networks (2014)
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