Prioritization vs zero-rating: Discrimination on the internet

Axel Gautier and Robert Somogyi
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Axel Gautier: Université catholique de Louvain, LIDAM/CORE, Belgium

No 3137, LIDAM Reprints CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: This paper analyzes two business practices on the mobile internet market, paid prioritization and zero-rating. These practices allow the internet service provider to discriminate different content types. With prioritization, the ISP delivers content at different speeds; with zero-rating, the ISP charges different prices. In recent years these practices have attracted considerable media attention and regulatory interest. When the asymmetry between content providers is limited, in particular with regard to their ability to attract traffic or to monetize it, we first show that the ISP can extract more surplus from consumers by privileging the relatively weaker content and restoring symmetry between content providers. Next, we show that the ISP chooses prioritization when traffic is highly valuable for content providers and congestion is severe, and zero-rating in all other cases. Finally, we find that a policy banning prioritization can lead to zero-rating and a reduction in consumer surplus.

Keywords: Net Neutrality; Paid Prioritization; Zero-rating; Sponsored Data; Data Cap; Congestion (search for similar items in EconPapers)
JEL-codes: D21 L12 L51 L96 (search for similar items in EconPapers)
Date: 2020-12-31
Note: In: International Journal of Industrial Organization, 2020, vol. 73, 102662
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Citations: View citations in EconPapers (11)

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Related works:
Journal Article: Prioritization vs zero-rating: Discrimination on the internet (2020)
Working Paper: Prioritization vs Zero-Rating: Discrimination on the Internet (2018)
Working Paper: Prioritization vs zero rating: Discrimination on the internet (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:cor:louvrp:3137

DOI: 10.1016/j.ijindorg.2020.102662

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