Net Neutrality and Fairness: An Empirical Investigation of Consumers' Appreciation of Quality of Service in Internet Access

Abstract:     
The academic debate on net neutrality has thus far focused on the relationship between Internet service providers (ISPs) and content providers. In this paper instead, we investigate the drivers for Internet users' appreciation of a differentiated services regime in lieu of net neutrality. User tiering, i.e., a pay-for-priority arrangement between the ISP and an end user, is usually not scrutinized by policy makers. Nevertheless, user tiering is not yet offered by ISPs. We conjecture that the individual perception of fairness is important for an user's appreciation of user tiering and, therefore, also for the success of quality of service (QoS) offerings in next generation networks. We conceptualize different notions of fairness and show in a representative survey among German Internet users that the perception of fairness is decisive for the attitude towards user tiering as well as for the willingness-to-pay for tiered Internet access. Moreover, we compare user tiering that is provided via a relative QoS mechanism (in which prioritized transmissions are expedited over concurrent non-prioritized transmissions) to a dedicated QoS mechanism (in which a portion of the available transmission capacity is reserved explicitly for the priority service) in this regard and find remarkable differences. In general, users prefer a neutral Internet access over a tiered access and a dedicated over a relative QoS mechanism. However, given our data, it is doubtful whether ISPs are able to profit from a departure of net neutrality in Internet access after all. We find that the introduction of user tiering will likely render customers upset and will erode the willingness-to-pay for the non-prioritized best-effort class.

Number of Pages in PDF File: 31

Keywords: Net Neutrality, Quality of Service, Consumer Psychology, Fairness, Pricing, Regulation, Economics of IS

JEL Classification: L50, L96

working papers series