'Net Neutrality', Non-Discrimination and Digital Distribution of Content Through the Internet

Abstract

The vast majority of US residential consumers face a monopoly or duopoly in broadband Internet access. Up to now, the Internet was characterizedby a regime of 'net neutrality' where there was no discrimination in theprice of a transmitted information packet based on the identities ofeither the transmitter or the receiver or based on the application ortype of content that it contained. The providers of DSL or cable modemaccess in the United States, taking advantage of a recent regulatorychange that effectively abolished net neutrality and non-discriminationprotections, and possessing significant market power, have recentlydiscussed implementing a variety of discriminatory pricing schemes. Thispaper discusses and evaluates the implication of a number of theseschemes on prices, profits of the network access providers and those ofthe complementary applications and content providers, as well as theimpact on consumers. We also discuss an assortment of anti-competitiveeffects of such price discrimination, and evaluate the possibility ofimposition of net neutrality by law.

Keywords: net neutrality, Internet, price discrimination, vertical restrictions, two-sided

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