Competing One-Way Essential Complements: The Forgotten Side of Net Neutrality

25 Pages Posted: 28 Feb 2015

See all articles by Sébastien Broos

Sébastien Broos

University of Liege, HEC Management School

Axel Gautier

University of Liege - Research Center on Public and Population Economics; Catholic University of Louvain (UCL) - Center for Operations Research and Econometrics (CORE)

Date Written: February 26, 2015

Abstract

We analyze the incentives of internet service providers (ISPs) to break net neutrality by excluding internet applications competing with their own products, a typical example being the exclusion of VoIP applications by telecom companies offering internet and voice services. Exclusion is not a concern when the ISP is a monopoly because it can extract the additional surplus created by the application through price rebalancing. When ISPs compete, it could lead to a fragmented internet where only one firm offers the application. We show that, both in monopoly and duopoly, prohibiting the exclusion of the app and surcharges for its use – a strong form of net neutrality – is not welfare improving.

Keywords: Net Neutrality, Foreclosure, One-Way Essential Complements

JEL Classification: L12, L13, L51, L96

Suggested Citation

Broos, Sébastien and Gautier, Axel, Competing One-Way Essential Complements: The Forgotten Side of Net Neutrality (February 26, 2015). Available at SSRN: https://ssrn.com/abstract=2570924 or http://dx.doi.org/10.2139/ssrn.2570924

Sébastien Broos (Contact Author)

University of Liege, HEC Management School ( email )

Liège
Belgium

Axel Gautier

University of Liege - Research Center on Public and Population Economics ( email )

Boulevard du Rectorat, 7, Batiment 31
Sart-Tilman
B-4000 Liege, 4000
Belgium

Catholic University of Louvain (UCL) - Center for Operations Research and Econometrics (CORE) ( email )

34 Voie du Roman Pays
B-1348 Louvain-la-Neuve, b-1348
Belgium
+32-10-47.43.01 (Fax)

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