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WESII Workshop UC Berkeley – March 5, 2009

WESII Workshop UC Berkeley – March 5, 2009. "Net Neutrality: The Economics Literature“ Neil Gandal Tel Aviv University. Economics of Net Neutrality (NN). Economics Literature has modeled four sets of “Players” Consumers Conduits – Broadband Service Providers Content Providers

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WESII Workshop UC Berkeley – March 5, 2009

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  1. WESII Workshop UC Berkeley – March 5, 2009 "Net Neutrality: The Economics Literature“ Neil Gandal Tel Aviv University

  2. Economics of Net Neutrality (NN) Economics Literature has modeled four sets of “Players” • Consumers • Conduits – Broadband Service Providers • Content Providers • Intermediaries

  3. Formal Economics Models:Examining Some of the Issues • Systems Markets: Hardware/Software or two sided markets • Access Provider as platform – Consumers on one side; content providers on other side • Foreclosure issue: Does access provider gain by accommodating more content? • Pricing Issue – What would access provider charge content providers? (tiering, etc.) • Church and Gandal (2000) • Cable TV;Vertical Integration, Chipty (2001)

  4. Economics Literature: Theoretical Models that Examine NN • Hermalin and Katz (2007) – models net neutrality as a single quality requirement – application providers have different valuations • Cheng, Bandyopadhyaya, and Guo (2007) –content providers can avoid congestion by paying for “preferential” access • Economides and Tag (2008) -Access Provider (RBOC) sells subscriptions to consumers and access to content providers • Hogendorn (2007) - Intermediary (Google) sells subscriptions to consumers and access to content providers

  5. Economics Literature –Other Issues • How does net neutrality affect incentives of broadband access providers to invest in capacity/quality? (Choi and Kim 2008) Other important issues not examined yet in formal economic models • How does NN affect congestion? • How does NN affect security? • How does NN affect user-generated public goods • How Does NN affect industry market structure (mergers, etc.)?

  6. High Speed (Broadband) Internet Access - From FCC data • 51.2 Million Lines - December 31, 2005 • 82.8 Million Lines - December 31, 2006 • 121.2 Million Lines - December 31, 2007 • 62% increase from 2005-2006 • 46% increase from 2006-2007 • 74.0 million residential lines • Cable Modem (47.8%) • ADSL (35.8%) • Other (16.4%) – primarily wireless

  7. Competition in Broadband Access (FCC data) From : http://www.fcc.gov/wcb/iatd/comp.html

  8. Competition in Broadband Access (FCC data) From http://www.fcc.gov/wcb/iatd/comp.html

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