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Net Neutrality, Broadband Market Coverage and Innovation at the Edge

63 Pages Posted: 18 Jun 2009 Last revised: 21 Apr 2013

Subhajyoti Bandyopadhyay

University of Florida - Warrington College of Business Administration

Hong Guo

University of Notre Dame

Hsing Kenneth Cheng

University of Florida - Warrington College of Business

Date Written: May 15, 2009

Abstract

Net neutrality is a widely debated policy issue that has the potential to alter the dynamics of accessing online content. The focal point of the debate lies in whether broadband service providers should be allowed to charge content providers for the preferential delivery of their digital content. That decision will affect broadband market coverage as well as the issue of long-term competition and innovation in the market for digital content. Our research aims to analyze and address these issues. We propose a game theoretical model with three players – the broadband service provider, the content providers, and the consumers – where the broadband service provider, in its capacity of an intermediary between the content providers and the consumers, is modeled as a two-sided market platform. We find that while abandoning the principle of net neutrality might increase consumer surplus and increase broadband market coverage in the short run, it can also have the insalubrious effect of hindering the ability of startups to compete against established rivals and thus reduce innovation at the edge. The results should be of great interest to policymakers as they debate on this very crucial issue.

Keywords: Network access policy, Net Neutrality, Two-sided markets, Consumer surplus, Social Welfare, Innovation at the edge

JEL Classification: L43, L51, L52

Suggested Citation

Bandyopadhyay, Subhajyoti and Guo, Hong and Cheng, Hsing Kenneth, Net Neutrality, Broadband Market Coverage and Innovation at the Edge (May 15, 2009). Available at SSRN: https://ssrn.com/abstract=1422061 or http://dx.doi.org/10.2139/ssrn.1422061

Subhajyoti Bandyopadhyay (Contact Author)

University of Florida - Warrington College of Business Administration ( email )

Gainesville, FL 32611
United States

Hong Guo

University of Notre Dame ( email )

356 Mendoza College of Business
Notre Dame, IN 46556-5646
United States

HOME PAGE: http://www.nd.edu/~hguo

Hsing Kenneth Cheng

University of Florida - Warrington College of Business ( email )

P.O. Box 117169
Gainesville, FL 32611-7169
United States
352-392-7068 (Phone)
352-392-5438 (Fax)

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