Analyzing Net Neutrality Rules and Their Impact On Traffic

Martin Peitz, University of Mannheim Department of Economics and Florian Schuett, Tilburg Law and Economics Center (TILEC), Tilburg University Center and Faculty of Economics and Business Adminsitration, have published Net Neutrality and Inflation of Traffic as TILEC Discussion Paper No. 2015-006 and CentER Discussion Paper No. 2015-017. Here is the abstract.

Under strict net neutrality Internet service providers (ISPs) are required to carry data without any differentiation and at no cost to the content provider. We provide a simple framework with a monopoly ISP to evaluate different net neutrality rules. Content differs in its sensitivity to delay. Content providers can use congestion control techniques to reduce delay for their content, but do not take into account the effect of their decisions on the aggregate volume of traffic. As a result, strict net neutrality often leads to socially inefficient traffic inflation. We show that piece-meal departures from net neutrality, such as transmission fees or prioritization based on sensitivity to delay, do not necessarily improve efficiency. However, allowing the ISP to introduce bandwidth tiering and charge for prioritized delivery can implement the efficient allocation.

Download the paper from SSRN at the link.