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网络中立是一个备受争议的政策问题,它有可能改变访问在线内容的动力。 辩论的焦点在于是否应允许宽带服务提供商向内容提供商收取优先交付其数字内容的费用。 该决定将影响宽带市场覆盖范围以及数字内容市场的长期竞争和创新问题。 我们的研究旨在分析和解决这些问题。 我们提出了一个具有三个参与者的博弈论模型-宽带服务提供商,内容提供商和消费者-宽带服务提供商以内容提供商和消费者之间的中介身份建模为双方市场平台。 我们发现,虽然放弃净中性原则可能会在短期内增加消费者剩余并增加宽带市场覆盖率,但也会产生有害的影响,阻碍初创企业与既定竞争对手竞争的能力,从而减少边缘创新。 政策制定者在就这一非常关键的问题进行辩论时,其结果应引起人们的极大兴趣。
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Electronic copy available at: http://ssrn.com/abstract=1422061
1
Net Neutrality, Broadband Market Coverage
and Innovation at the Edge
Abstract
Net neutrality is a widely debated policy issue that has the potential to alter the dynamics
of accessing online content. The focal point of the debate lies in whether broadband
service providers should be allowed to charge content providers for the preferential
delivery of their digital content. This decision will affect broadband market coverage as
well as the issues of long-term competition and innovation in the market for digital
content. Our research aims to analyze and address these issues. We propose a game
theoretical model with three players – the broadband service provider, the content
providers, and the consumers – where the broadband service provider, in its capacity of
an intermediary between the content providers and the consumers, is modeled as a two-
sided market platform. We find that while abandoning the principle of net neutrality
might sometimes result in increased consumer surplus and broadband market coverage, it
can also have the insalubrious effect of hindering the ability of startups to compete
against established rivals and thus reduce innovation at the edge. The results should be of
great interest to policymakers as they debate on this very crucial issue.
Keywords: Network Access Policy, Net Neutrality, Two-Sided Markets, Consumer Surplus,
Social Welfare, Innovation at the Edge.
Electronic copy available at: https://ssrn.com/abstract=1422061
Electronic copy available at: http://ssrn.com/abstract=1422061
2
INTRODUCTION
Net neutrality is a widely discussed and debated policy issue that can potentially change
the basic “rules of the game” of electronic commerce, insofar as changing the ways by which
businesses and the general public access information through the Internet, and determining the
nature of competition among online content providers. As a result, the decisions that are taken on
this issue can significantly alter the way online content is consumed in the future.
The term network neutrality was first proposed by the Columbia Law School professor
Tim Wu in 2003 (Wu 2003), but received first widespread media attention three years later when
some broadband service providers (BSPs) like Verizon, Comcast and AT&T (among others)
publicly proposed to charge popular online websites for the priority delivery of the latter‟s
content to their residential and commercial customers (Helm 2006; Waldmeir 2006). The
proposal encountered stiff resistance from those who were supposed to be charged, and thus
erstwhile competitors like Google, Yahoo! and Microsoft were soon lobbying before the United
States Congress to pass legislation that would prevent the broadband service providers from
carrying out their proposed plan (WSJ 2006), and thereby maintain what was termed the
„neutrality‟ of the Internet.
1
This would involve the designing of “rules that prevent network
1
A „neutral‟ Internet is one that is expected to treat every packet with equal priority, regardless of its content, origin
or platform.
Electronic copy available at: https://ssrn.com/abstract=1422061
3
operators and BSPs from using their power over the transmission technology to negatively affect
competition in complementary markets for applications, content and portals”
(van Schewick
2007).
The supporters of net neutrality believe that a “maximally useful public information
network aspires to treat all content, sites, and platforms equally” (Wu 2003), and while a formal
definition of the operationalization of the principle does not exist, Hahn and Wallsten (Hahn et al.
2006) point out that it “usually means that broadband service providers charge consumers only
once for Internet access, do not favor one content provider over another, and do not charge
content providers for sending information over broadband lines to end users.”
Backers of the „net neutrality‟ principle would like to maintain the current status quo,
whereby the ISPs charge only one set of consumers – the end customers they serve. Independent
commentators have asked the Federal Communications Commission to impose rules on the ISPs
that would prevent them to discriminate against the third-party content providers (Coalition 2002;
Wu et al. 2003). This, they claim, would preserve the egalitarian philosophy on which the
Internet was founded (Lessig 2001). Other backers of the principle are many online start-ups,
who claim that it would be almost impossible for them to pay these proposed fees when their
revenue streams are almost non-existent, since they have to give away most of their content for
free in order to build a loyal customer base (Sydell 2006). There are venture capitalists who have
Electronic copy available at: https://ssrn.com/abstract=1422061
4
argued that abandoning net neutrality would result in would-be entrepreneurs becoming more
hesitant to start a business, a state of affairs that might even hurt the competitiveness of the
American online firms in the long run (Sydell 2006; Wu 2006).
Opponents of network neutrality legislation (see, for example, (National Cable &
Telecommunications Association 2003; Owen et al. 2003; Yoo 2005) have denied its need in the
first place, since they feel that the Internet service providers do not have an incentive to
discriminate against content providers (Speta 2000a; Speta 2000b). The Internet service
providers themselves have argued that it is they who have put their resources to maintain and
upgrade the physical services that they provide to the consumers, and that the popular web sites
have so far got a “free ride” on their resources (Waldmeir 2006), and that the “Internet service
providers should be allowed to strike deals to give certain Web sites or services priority in
reaching computer users” (Krim 2005). Lee and Wu refute both these points in their paper (Lee
et al. 2009).
Lobbied intensely by both sides of the issue, the United States Congress is currently
considering proposals to introduce net neutrality legislation (Dunbar 2006; McCullagh et al.
2006; Windhausen 2006). The U.S. House of Representatives and the Senate have held several
hearings on the subject (Representatives 2005; Senate 2006). A bill to preserve network
neutrality on the Internet was introduced in the United States Senate in 2007 (S.215, 2007), and
Electronic copy available at: https://ssrn.com/abstract=1422061
5
is currently under referral to the Committee on Commerce, Science, and Transportation for
deliberation. The House of Representatives introduced a bill of its own in 2008 (H.R.5353, 2008),
and that too is under deliberation with several subcommittees. The Federal Trade Commission
has also chimed in, and has recently published a report that has advised a wait-and-watch
approach on the matter (FTC 2007). In a potentially major development, the Federal
Communications Commission has proposed a set of regulations that includes the “principle of
non-discrimination” whereby “broadband providers cannot discriminate against particular
Internet content or applications” (Genachowski 2009), a decision that was welcomed by the
proponents of net neutrality.
As is to be expected in a debate which has implications in many different areas,
academicians too can be found on both sides of the debate (for a recent example of such debate,
see (van Schewick et al. 2009)). In this paper, we concentrate on some of the economic aspects
of the debate. As Economides and Tag (2007) point out, in sharp contrast to the large amount of
literature that discusses the legal issues surrounding net neutrality, there is a surprising lack of
rigorous economic analysis of the net neutrality debate. One stream of economic research
considers the net neutrality issue as one of the broadband service providers acting as a
monopolist producer, who should be allowed to discriminate its services among its customers,
which we believe completely miss the point – there has never been any doubt about the right or
Electronic copy available at: https://ssrn.com/abstract=1422061
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