Net Neutrality and CDN Intermediation

Posted: 12 Nov 2019

See all articles by Pio Baake

Pio Baake

German Institute for Economic Research (DIW Berlin)

Slobodan Sudaric

cLabs

Date Written: March 1, 2019

Abstract

We analyze competition between Internet Service Providers (ISPs) where consumers demand heterogeneous content within two Quality-of-Service (QoS) regimes, Net Neutrality and Paid Prioritization, and show that paid prioritization increases the static efficiency compared to a neutral network. We also consider paid prioritization intermediated by Content Delivery Networks (CDNs). While the use of CDNs is welfare neutral, it results in higher consumer prices for internet access. Regarding incentives to invest in network capacity we show that prioritization regimes lead to higher incentives than the neutral regime as long as capacity is scarce, while investment is highest in the presence of CDNs.

Keywords: Content delivery network,Investment,Net neutrality,Prioritization

JEL Classification: L13,L51,L96

Suggested Citation

Baake, Pio and Sudaric, Slobodan, Net Neutrality and CDN Intermediation (March 1, 2019). Information Economics and Policy, Vol. 46, 2019, Available at SSRN: https://ssrn.com/abstract=3479137

Pio Baake

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstra├če 58
Berlin, 10117
Germany

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