Is Non-Neutrality Profitable for the Stakeholders of the Internet Market?

TL;DR

This paper analyzes the profitability and market dynamics of non-neutral Internet policies, showing that non-neutral ISPs can dominate the market by offering premium content, leading to the exclusion of neutral ISPs.

Contribution

It models a strategic game with ISPs and a content provider, demonstrating conditions under which non-neutral practices lead to market dominance and exclusion of neutral ISPs.

Findings

Non-neutral ISPs can outcompete neutral ISPs through premium quality offerings.

The equilibrium involves the CP paying for premium quality on the non-neutral ISP.

Neutral ISPs can be driven out of the market under certain strategic conditions.

Abstract

Net neutrality on the Internet is perceived as the policy that mandates Internet Service Providers (ISPs) to treat all data equally, regardless of the source, destination, or type of transmitted data. In this work, we consider a scheme in which the decision makers of the market are two ISPs, one "big" Content Provider (CP), and a continuum of end-users. One of the ISPs is neutral and the other is non-neutral, i.e. she offers a premium quality to a CP in exchange for a side-payment. In addition, we assume that the CP can differentiate between ISPs by controlling the quality of the content she is offering on each one. In this part of the paper, we consider a scenario in which end-users are not locked in with the ISPs and can switch between ISPs easily. We formulate a sequential game, and show that there exists a unique Sub-game Perfect Nash Equilibrium (SPNE) for the game, where the CP pays the side-payment to the non-neutral ISP and offers her content with the premium quality. In addition, the CP does not offer her content on the neutral ISP. Thus, driving this ISP out of the market.