Zero-rating, content quality, and network capacity

We consider a departure from net neutrality by an Internet service provider (ISP) that financially discriminates among content providers through exclusive zero-rating contracts. Zero-rating is instrument to distort competition between and the manner in which consumers value content. analyze its implications for incentives provide quality market invest broadband infrastructure. makes more expensive use imply downward distortion of quality. Content switch minimal differentiation vertical outcome. Next, we find implies underprovision infrastructure, comes standard rent-extraction argument cost-alleviation channel related complementarity network capacity Finally, when implemented, found be welfare reducing detrimental consumers.