A Study of Non-Neutral Networks with Usage-based Prices

TL;DR

This paper analyzes the economic implications of non-neutral network behaviors, including usage-based pricing, side-payments, and service discrimination, using a linear demand-response model with advertising revenues.

Contribution

It introduces a comprehensive model capturing non-neutral practices, including side-payments and discrimination, extending previous work to non-monopolistic content providers.

Findings

Non-neutral behaviors can significantly affect revenues and market dynamics.

Usage-based pricing impacts consumer and provider incentives.

Service discrimination can lead to market distortions.

Abstract

Hahn and Wallsten wrote that network neutrality "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." In this paper we study the implications of non-neutral behaviors under a simple model of linear demand-response to usage-based prices. We take into account advertising revenues and consider both cooperative and non-cooperative scenarios. In particular, we model the impact of side-payments between service and content providers. We also consider the effect of service discrimination by access providers, as well as an extension of our model to non-monopolistic content providers.