Incentivizing Investment in the Internet Ecosystem and Net Neutrality Regulation: Taking it to the Edge
37 Pages Posted: 19 Mar 2018
Date Written: March 16, 2018
Net neutrality regulation impacts both ISPs and Edge providers. Although Edge Providers are not directly regulated by the FCC, they have a stake in the enforcement or abandonment of Net Neutrality regulation. Our analysis evaluates policy changes based on whether the modified rules serve to incentivize investments in the larger Internet ecosystem. In our analysis, an increase in investment is associated with an increase in investor wealth, while a decrease is associated with a decrease in investor wealth. The firms in our sample include Internet Service Providers(ISPs) and Edge Providers, grouped into old and new media companies. We employ an event study and examine investors' reaction to five news events relating to Net Neutrality regulation. We find that each event had a statistically significant effect on at least one group of shareholders. The event that had the largest effect on daily returns was the election of President Trump. Our main conclusion is that the FCC's and courts' Net Neutrality decisions have had a larger financial impact on the edge, rather than the ISPs. This is a striking finding in light of the FCC's focus on incentivizing ISPs, and spending comparatively little effort in determining how its policy effects edge providers.
Keywords: Net-Neutrality, broadband
JEL Classification: L13
Suggested Citation: Suggested Citation