Asymmetric Neutrality Regulation and Innovation at the Edges: Fixed vs Mobile Networks

35 Pages Posted: 17 Oct 2013

See all articles by Jay Pil Choi

Jay Pil Choi

Michigan State University - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Doh-Shin Jeon

Toulouse School of Economics (TSE); Centre for Economic Policy Research (CEPR)

Byung-Cheol Kim

University of Alabama

Multiple version iconThere are 2 versions of this paper

Date Written: October 1, 2013

Abstract

We study how net neutrality regulations affect high-bandwidth content providers investment incentives in quality of services (QoS). We find that the effects crucially depend on network capacity levels. With a limited network capacity, the prioritized delivery services are complements to content providers' investments and can facilitate entry of high-bandwidth content. By contrast, if the network capacity is large enough, the prioritized delivery and QoS investment are substitutes. In either case, the social welfare effects of the prioritized service is ambiguous. In the limited capacity case, the beneficial effects of entry by high-band width content should be weighed against the cost of increasing congestion for other existing content. In the high capacity case, the negative impact of reduced investment incentives can be counterbalanced by the benefit of improved trac management. Our findings have important implications for the contrasting neutrality regulations across the Atlantic: US FCC treats mobile networks more leniently than fixed networks, while the EU treats them equally.

Keywords: Net neutrality, asymmetric regulation, quality of service, investment incentives

JEL Classification: L1, L5, O3

Suggested Citation

Choi, Jay Pil and Jeon, Doh-Shin and Kim, Byung-Cheol, Asymmetric Neutrality Regulation and Innovation at the Edges: Fixed vs Mobile Networks (October 1, 2013). NET Institute Working Paper No. 13-24, Available at SSRN: https://ssrn.com/abstract=2340910 or http://dx.doi.org/10.2139/ssrn.2340910

Jay Pil Choi (Contact Author)

Michigan State University - Department of Economics ( email )

101 Marshall Hall
East Lansing, MI 48824
United States
517-353-7281 (Phone)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

Doh-Shin Jeon

Toulouse School of Economics (TSE) ( email )

Place Anatole-France
Toulouse Cedex, F-31042
France

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Byung-Cheol Kim

University of Alabama ( email )

Culverhouse College of Business
Tuscaloosa, AL 35487-0223
United States
7708462727 (Phone)
7708462727 (Fax)

HOME PAGE: http://https://sites.google.com/site/byungcheolkim76/

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