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Network Neutrality and Congestion Sensitive Content Providers: Implications for Service Innovation, Broadband Investment and Regulation

Authors: Kramer, Jan - Karlsruhe Institute of Technology
Wiewiorra, Lukas - Karlsruhe Institute of Technology
Keywords: Telecommunications, Net Neutrality, Quality of Service, Innovation, Investment, Regulation
Issue Date: 2010
Series/Report no.: Net Institute Working Paper;10-09
Abstract: We consider a two-sided market model with a monopolistic Internet Service Provider (ISP), network congestion sensitive content providers (CPs), and Internet customers in order to study the impact of Quality- of-Service (QoS) tiering on service innovation, broadband investments, and welfare in comparison to network neutrality. We find that QoS tiering is the more efficient regime in the short-run. However it does not promote entry by new, congestion sensitive CPs, because the ISP can expropriate much of the CPs' surplus. In the long-run, QoS tiering may lead to more or less broadband capacity and welfare, depending on the competition-elasticity of CPs' revenues.
Appears in Collections:NET Institute Working Papers Series

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