Weak versus Strong Net Neutrality: Correction and Extensions

Abstract

We correct and extend the results of Gans (2015) regarding the effects of net neutrality regulation on equilibrium outcomes in settings where a content provider sells its services to consumers for a fee. We examine both pricing and investment effects. We extend the earlier paper’s result that weak forms of net neutrality are ineffective and also show that even a strong form of net neutrality may be ineffective. In addition, we demonstrate that, when strong net neutrality does affect the equilibrium outcome, it may harm efficiency by distorting both ISP and content provider investment and service-quality choices.

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

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