Fair Cost Sharing: Big techs vs Telcos

Bruno Jullien () and Matthieu Bouvard ()
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Bruno Jullien: TSE-R - TSE-R Toulouse School of Economics – Recherche - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement
Matthieu Bouvard: TSE-R - TSE-R Toulouse School of Economics – Recherche - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement

Working Papers from HAL

Abstract: We study a cost-sharing mechanism where a content provider contributes to covering the costs incurred by a network operator when delivering content to consumers. The cost- share not only boosts the content provider's incentives to moderate traffic but also affects the price composition for consumers buying access and content. We show the overall effect on consumer welfare depends on the content provider's ability to monetize users. When that ability is high, introducing a cost-share can lead to lower overall prices and higher consumer welfare. We study the robustness of this result to long-term investments in cost reduction by the operator and to heterogeneity in consumers' taste for content. In extensions with multiple contents and multiple operators, contractual externalities arise that suggest a role for regulation.

Date: 2023-11-13
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