"Net Neutrality," Non-Discrimination and Digital Distribution Through the Internet

Article Source: NET Institute Working Paper #07-03, 2007; New York University Law and Economics Working Papers No. 97
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This paper asks how letting broadband carriers charge some users more could hurt consumers.


Policy Relevance:

Broadband networks are important to the growth of the United States economy, and non-discrimination rules ("net neutrality") have been a key factor in the Internet's growth.


Key Takeaways:
  • The majority of consumers have a choice of only one or two broadband providers.

  • Until 2005, broadband access providers could not charge applications and content providers “on the other side” of the network (a “non-discrimination” rule). Antitrust suits are too slow to work as a substitute remedy.

  • Google, Ebay, and developed valuable services at the edges of the network without the fear that carriers could demand a big cut of their revenues once they succeeded.

  • The author warns that allowing carriers to charge more for premium service could:
    • Give carriers a reason to degrade their service to force a switch to "premium."
    • Allow carriers to eliminate competitors who rely on the Internet, such as VoIP providers.
    • Raise prices to consumers.
    • Discourage the growth of broadband networks.



Nicholas Economides

About Nicholas Economides

Nicholas Economides is Professor of Economics at the Stern School of Business of New York University. He is also Executive Director of the NET Institute, a worldwide focal point for research on the economics of network and high technology industries. Professor Economides is an internationally recognized academic authority on network economics, electronic commerce and public policy.

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