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The economics of network neutrality
Author(s) -
Economides Nicholas,
Hermalin Benjamin E.
Publication year - 2012
Publication title -
the rand journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 3.687
H-Index - 108
eISSN - 1756-2171
pISSN - 0741-6261
DOI - 10.1111/1756-2171.12001
Subject(s) - net neutrality , the internet , internet service provider , neutrality , service provider , internet traffic , business , welfare , service (business) , internet privacy , scheme (mathematics) , internet transit , microeconomics , public economics , computer security , computer science , economics , marketing , law , world wide web , market economy , political science , mathematical analysis , mathematics
Under the current regime for Internet access, “network neutrality,” parties are billed only by the Internet service provider (ISP) through which they connect to the Internet; pricing is not contingent on the content being transmitted. Recently, ISPs have proposed that content and applications providers pay them additional fees for accessing the ISPs’ residential clients, as well as fees to prioritize certain content. We analyze the private and social implications of such fees when the network is congested and more traffic implies greater delays. We derive conditions under which network neutrality would be welfare superior to any feasible scheme for prioritizing service.