Net neutrality and inflation of traffic

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URL:	https://ub-madoc.bib.uni-mannheim.de/37535
URN:	urn:nbn:de:bsz:180-madoc-375355
Document Type:	Working paper
Year of publication:	2015
The title of a journal, publication series:	Working Paper Series
Volume:	15-05
Place of publication:	Mannheim
Publication language:	English
Institution:	School of Law and Economics > Industrieökonomik, Wettbewerbspolitik u. Regulierung (Peitz 2007-)
MADOC publication series:	Department of Economics > Working Paper Series
Subject:	330 Economics
Classification:	JEL: L12 , L51 , L86,
Keywords (English):	Net neutrality , network congestion , telecommunications , quality of service
Abstract:	Under strict net neutrality Internet service providers (ISPs) are required to carry data without any differentiation and at no cost to the content provider. We provide a simple framework with a monopoly ISP to evaluate different net neutrality rules. Content differs in its sensitivity to delay. Content providers can use congestion control techniques to reduce delay for their content, but do not take into account the effect of their decisions on the aggregate volume of traffic. As a result, strict net neutrality often leads to socially inefficient traffic in ation. We show that piece-meal departures from net neutrality, such as transmission fees or prioritization based on sensitivity to delay, do not necessarily improve efficiency. However, allowing the ISP to introduce bandwidth tiering and charge for prioritized delivery can implement the efficient allocation.