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Market driven network neutrality and the fallacy of a two-tiered Internet traffic regulation

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  • Knieps, Günter
  • Stocker, Volker

Abstract

Within a Generalized DiffServ architecture entrepreneurial flexibility for building intelligent multipurpose traffic architectures enables the provision of a variety of tailored traffic services for a wide range of heterogeneous application services. In order to solve the entrepreneurial traffic capacity allocation problem, we propose an incentive compatible pricing and quality of service (QoS) differentiation model for the Generalized DiffServ architecture resulting in market driven network neutrality. Optimal allocation decisions based on the opportunity costs of capacity usage require that all relevant traffic classes are taken into account simultaneously, rather than 1) excluding traffic classes (by means of minimum traffic quality requirements), 2) prescribing a maximum or minimum number of traffic classes or 3) arbitrarily including parameter specifications for or levels of QoS which are not reflected by demand side. It is particularly important that the opportunity costs of capacity reservations for deterministic premium traffic classes are interrelated with subsequent non-deterministic traffic classes. As a consequence, every form of market split would be artificial.

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  • Knieps, Günter & Stocker, Volker, 2014. "Market driven network neutrality and the fallacy of a two-tiered Internet traffic regulation," Discussion Papers 149, University of Freiburg, Institute for Transport Economics and Regional Policy.
    • Handle: RePEc:zbw:aluivr:149
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    References listed on IDEAS

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    1. Knieps, Günter, 2011. "Market driven network neutrality and the fallacies of Internet traffic quality regulation," Discussion Papers 136, University of Freiburg, Institute for Transport Economics and Regional Policy.
    2. Schwartz Marius & Weiser Philip J., 2009. "Introduction to a Special Issue on Network Neutrality," Review of Network Economics, De Gruyter, vol. 8(1), pages 1-12, March.
    3. Günter Knieps, 2013. "Competition And The Railroads: A European Perspective," Journal of Competition Law and Economics, Oxford University Press, vol. 9(1), pages 153-169.
    4. Knieps, Günter, 2013. "The evolution of the generalized differentiated services architecture and the changing role of the Internet engineering task force," Discussion Papers 147, University of Freiburg, Institute for Transport Economics and Regional Policy.
    5. Knieps, Günter, 2013. "The evolution of the generalized differentiated services architecture and the changing role of the internet engineering task force," 24th European Regional ITS Conference, Florence 2013 88507, International Telecommunications Society (ITS).
    6. Knieps, Günter, 2012. "Competition and the railroads: A European perspective," Discussion Papers 142, University of Freiburg, Institute for Transport Economics and Regional Policy.
    7. Knieps, Günter, 2011. "Market driven network neutrality and the fallacies of internet traffic quality regulation," 22nd European Regional ITS Conference, Budapest 2011: Innovative ICT Applications - Emerging Regulatory, Economic and Policy Issues 52149, International Telecommunications Society (ITS).
    8. Robin S. Lee & Tim Wu, 2009. "Subsidizing Creativity through Network Design: Zero-Pricing and Net Neutrality," Journal of Economic Perspectives, American Economic Association, vol. 23(3), pages 61-76, Summer.
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    Cited by:

    1. Knieps, Günter, 2014. "Competition and third party access in railroads," Discussion Papers 150, University of Freiburg, Institute for Transport Economics and Regional Policy.
    2. Knieps, Günter & Stocker, Volker, 2014. "The fallacies of regulatory market splits: Network neutrality regulation ante portas," Discussion Papers 151, University of Freiburg, Institute for Transport Economics and Regional Policy.

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