Multiple Internet Service Classes Revisited

It is debatable in the literature that whether the provision of multiple Internet service classes is economically viable. In this work a critical study is undertaken for a general model that considers a continuum of users using heterogeneous congestible service classes, under a class of general concave congestion functions and an arbitrary distribution of user preferences. We show that there is a strict tendency for both a welfare-maximising social planner and a profit-seeking monopolist to offer multiple Internet service classes than a single homogeneous (best-effort) service class. Furthermore, in covered-market duopoly, we show that it is more likely to induce asymmetric equilibrium of differentiated prices, effectively creating dual service classes under competition.