Net Neutrality, Exclusivity Contracts, and Internet Fragmentation

نویسندگان

  • Frago Kourandi
  • Jan Krämer
  • Tommaso M. Valletti
چکیده

Net neutrality is believed to prevent Internet fragmentation. We examine the relationship between net neutrality regulation and Internet fragmentation in a game-theoretic model that considers the interplay between termination fees, exclusivity and competition between two Internet Service Providers (ISPs) and between two Content Providers (CPs). An exclusivity arrangement between an ISP and a CP reduces the CP’s exposure to some end users but it also reduces competition among the CPs. Fragmentation arises in equilibrium when competition between CPs is very strong, the CPs’revenues from advertisements are very low, the content of the CPs is highly complementary, or the termination fees are high. We …nd that the absence of fragmentation is always bene…cial for consumers, as they can enjoy all available content. Policy interventions that prevent fragmentation are thus good for consumers. However, results for total welfare are more mixed. A zero-price rule on tra¢ c termination is neither a su¢ cient nor a necessary policy instrument to prevent fragmentation. In fact, regulatory interventions may be ine¤ective or even detrimental to welfare and are only warranted under special circumstances.

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عنوان ژورنال:
  • Information Systems Research

دوره 26  شماره 

صفحات  -

تاریخ انتشار 2015