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Net Neutrality in the Content Provision and Internet Service Provision Markets

Author

Listed:
  • Turgut Erkul

    (Istanbul Technical University, Graduate School, Istanbul, Turkiye)

  • Sencer Ecer

    (Istanbul Technical University, Faculty of Management, Department of Economics, Istanbul, Turkiye)

Abstract

Relaxing net neutrality in the form of introducing termination fees and its welfare effects are considered in a model of imperfect complements. The equilibrium of the game between the internet service provider (ISP) and the content provider (CP) yields welfare-maximizing termination fees that depend on the relative size of the ISP’s and the CP’s own-price effects and the cross-price effects. Only when the ISP’s own price effect is relatively high compared to that of the CP’s, along with high cross price effects, such a fee should be allowed. On the other hand, when the CP’s own price effect is relatively high compared to that of the ISP’s, along with high cross price effects, mergers are expected and are likely not harmful to social welfare. Telecommunication regulators may find the results useful in their net neutrality decisions.

Suggested Citation

  • Turgut Erkul & Sencer Ecer, 2022. "Net Neutrality in the Content Provision and Internet Service Provision Markets," Istanbul Journal of Economics-Istanbul Iktisat Dergisi, Istanbul University, Faculty of Economics, vol. 72(72-2), pages 689-724, December.
    • Handle: RePEc:ist:journl:v:72:y:2022:i:2:p:689-724
    DOI: 10.26650/ISTJECON2022-1113428
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    References listed on IDEAS

    as
    1. Marc Bourreau & Romain Lestage, 2019. "Net neutrality and asymmetric platform competition," Journal of Regulatory Economics, Springer, vol. 55(2), pages 140-171, April.
    2. Nicholas Economides & Benjamin E. Hermalin, 2012. "The economics of network neutrality," RAND Journal of Economics, RAND Corporation, vol. 43(4), pages 602-629, December.
    3. Joshua Gans, 2015. "Weak versus strong net neutrality," Journal of Regulatory Economics, Springer, vol. 47(2), pages 183-200, April.
    4. Debasis Mitra & Abhinav Sridhar, 2018. "The Case for Formation of ISP-Content Providers Consortiums by Nash Bargaining for Internet Content Delivery," Papers 1810.10660, arXiv.org.
    5. Krämer, Jan & Wiewiorra, Lukas & Weinhardt, Christof, 2013. "Net neutrality: A progress report," Telecommunications Policy, Elsevier, vol. 37(9), pages 794-813.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Net neutrality; Termination fee; Waterbed effect JEL Classification: L13 ; L51 ; L86;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software

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