Weak versus Strong Net Neutrality

Abstract

This paper provides a framework to classify and evaluate the impact of net neutrality regulations on the allocation of consumer attention and the distribution of surplus between consumers, ISPs and content providers. While the model provided largely nests other contributions in the literature, here the focus is on including direct payments from consumers to content providers. With this additional price it is demonstrated that the type of net neutrality regulation (i.e., weak versus strong net neutrality) matters for such regulations to have real effects. In addition, we provide support for the notion that strong net neutrality may stimulate content provider investment while the model concludes that there is unlikely to be any negative impact from such regulation on ISP investment. Counter to many claims, it is argued here that ISP competition may not be a substitute for net neutrality regulation in bringing about these effects.

Keywords: regulation, net neutrality, internet service providers, content providers, infrastructure investment

JEL Classification: L1, D4, L12, L13, C63, D42, D43