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Zero-rating and network effects

Steffen Hoernig () and Francisco Monteiro

Economics Letters, 2020, vol. 186, issue C

Abstract: We consider internet service providers’ incentives to zero-rate, i.e. to not count the usage of certain services towards data allowances, in the absence of payments from content providers. We show that zero-rating is adopted if and only if it strongly increases subscriptions. For this it is necessary that participation (as opposed to usage) network effects are strong enough and if zero-rating offers raise expectations about other subscribers’ usage. Zero-rating then also maximizes total welfare.

Keywords: Zero-rating; Network effects; Net neutrality (search for similar items in EconPapers)
JEL-codes: D21 L51 L96 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1016/j.econlet.2019.108813

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