ISPs, Self-Interest, and Net Neutrality

Sébastien Broos, HEC-Ulg, and Axel Gautier, University of Liege, Research Center on Public and Population Economics, Catholic University of Louvain, Center for Operations Research and Econometrics, have published Competing One-Way Essential Complements: The Forgotten Side of Net Neutrality. Here is the abstract.

We analyze the incentives of internet service providers (ISPs) to break net neutrality by excluding internet applications competing with their own products, a typical example being the exclusion of VoIP applications by telecom companies offering internet and voice services. Exclusion is not a concern when the ISP is a monopoly because it can extract the additional surplus created by the application through price rebalancing. When ISPs compete, it could lead to a fragmented internet where only one firm offers the application. We show that, both in monopoly and duopoly, prohibiting the exclusion of the app and surcharges for its use – a strong form of net neutrality – is not welfare improving.

Download the paper from SSRN at the link.