We study how net neutrality regulations affect a high-bandwidth content provider (CP)'s investment incentives to enhance its quality of services (QoS) in content delivery to end users. We find that the effects crucially depend on whether the CP's entry decision is constrained by the Internet service provider (ISP)'s network capacity. If capacity is relatively large, prioritized services reduce the QoS investment as they become substitutes, but improve trafic management. With limited capacity, by contrast, prioritized delivery services are complementary to the CP's investments and can facilitate entry of congestionsensitive content; however, this creates more congestion for other existing content. Our analysis suggests that the optimal policy may call for potentially asymmetric regulations across mobile and fixed networks.
Net neutrality; network capacity; entry; quality of services (QoS); externalities; investments;
- D4: Market Structure and Pricing
- K2: Regulation and Business Law
- L1: Market Structure, Firm Strategy, and Market Performance
- L5: Regulation and Industrial Policy
- O3: Technological Change • Research and Development • Intellectual Property Rights
Jay Pil Choi, Doh-Shin Jeon, and Byung-Cheol Kim, “Net neutrality, Network capacity and Innovation at the Edges”, The Journal of Industrial Economics, vol. 66, n. 1, March 2018, pp. 172–204.
Jay Pil Choi, Doh-Shin Jeon, and Byung-Cheol Kim, “Net neutrality, Network capacity and Innovation at the Edges”, TSE Working Paper, n. 14-521, August 31, 2014, revised July 2017.
TSE Working Paper, n. 14-521, August 31, 2014, revised July 2017