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Network Neutrality, Access to Content and Online Advertising

Anna D'Annunzio and Antonio Russo ()

No 2013/57, RSCAS Working Papers from European University Institute

Abstract: We investigate possible effects of network neutrality regulation on the distribution of content in the Internet. We model a two-sided market, where consumers and advertisers interact through Content Providers (CPs), and CPs and consumers through Internet Service Providers (ISPs). Multiple impressions of an ad on a consumer are partially wasteful. Thus, equilibrium ad rates decrease with the number of CPs consumers can browse. Under network neutrality, CPs can connect to any ISP for free, while in the unregulated regime they have to pay a (non-discriminatory) access fee set by the ISP.We show that universal distribution of content is always an equilibrium with net neutrality regulation. Instead, in the unregulated regime, ISPs can use access fees to rule out universal distribution when it is not profitable, i.e. when repeated impressions of an ad rapidly lose value and consumers care for content availability to a small extent. We also find that the unregulated regime is never superior to net neutrality from a welfare point of view. Consumer and advertiser surplus are weakly higher under net neutrality. ISPs are unambiguously better off in the unregulated regime, while CPs are unambiguously worse off.

Keywords: Network neutrality; two-sided markets; Internet; advertising; fragmentation (search for similar items in EconPapers)
JEL-codes: L1 D43 L13 L51 (search for similar items in EconPapers)
Date: 2013-07
New Economics Papers: this item is included in nep-com, nep-ict, nep-mic, nep-mkt, nep-net and nep-reg
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http://cadmus.eui.eu/bitstream/handle/1814/27606/RSCAS_2013_57.pdf?sequence=1 (application/pdf)
http://hdl.handle.net/1814/27606 (text/html)

Related works:
Working Paper: Network Neutrality, Access to Content and Online Advertising (2013) Downloads
Working Paper: Network Neutrality, Access to Content and Online Advertising (2013) Downloads
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