Network Neutrality on the Internet: A Two-Sided Market Analysis

Net Neutrality, Internet and Networks, the Internet, and Cloud Computing

Article Snapshot


Nicholas Economides and Joacim Tag


Information Economics and Policy, Vol. 24, No. 2, pp. 91-104, 2012


This article describes conditions under which network neutrality is an economically optimal policy.

Policy Relevance

Theory alone may be inadequate for determining whether network neutrality is economically desirable; a clear answer requires careful data analysis.

Main Points

  • Under network neutrality, Internet service providers (ISPs) charge the same rate to all firms for every type of data, and move packets at uniform speeds.
    • This regime is preferred by many large Internet firms like Google, Amazon, and Microsoft, but is disliked by many large ISPs.
  • Abandoning network neutrality would have two major effects.
    • ISPs would probably charge content providers, like web sites, an extra fee in exchange for access to residential customers.
    • ISPs might charge extra fees for higher data transmission speeds, possibly improving the delivery of high-priority packets but possibly excluding non-paying firms from some markets.
  • The social benefit of keeping network neutrality in place depends on the degree to which content providers value consumers more than consumers value content providers.
  • If ISPs can use price discrimination, charging a varying fee based on the degree to which each consumer and firm desires the service, these results do not apply.


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