Net Neutrality and Inflation of Traffic

M. Peitz, F. Schütt

Research output: Working paperDiscussion paperOther research output

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Abstract

Under strict net neutrality Internet service providers (ISPs) are required to carry
data without any differentiation and at no cost to the content provider. We provide a simple framework with a monopoly ISP to evaluate different net neutrality rules. Content differs in its sensitivity to delay. Content providers can use congestion control techniques to reduce delay for their content, but do not take into account the effect of their decisions on the aggregate volume of traffic. As a result, strict net neutrality often leads to socially inefficient allocation of traffic and traffic inflation. We show that piece-meal departures from net neutrality, such as transmission fees or prioritization based on sensitivity to delay, do not necessarily improve efficiency. However, the ISP implements the efficient allocation when allowed to introduce bandwidth tiering and charge for prioritized delivery.
Original languageEnglish
Place of PublicationTilburg
PublisherDepartment of Economics
Number of pages46
Volume2015-017
Publication statusPublished - 3 Mar 2015

Publication series

NameCentER Discussion Paper
Volume2015-017

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Internet service providers
Bandwidth
Costs

Keywords

  • Net neutrality
  • network congestion
  • telecommunications,
  • quality of service

Cite this

Peitz, M., & Schütt, F. (2015). Net Neutrality and Inflation of Traffic. (CentER Discussion Paper; Vol. 2015-017). Tilburg: Department of Economics.
Peitz, M. ; Schütt, F. / Net Neutrality and Inflation of Traffic. Tilburg : Department of Economics, 2015. (CentER Discussion Paper).
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Peitz, M & Schütt, F 2015 'Net Neutrality and Inflation of Traffic' CentER Discussion Paper, vol. 2015-017, Department of Economics, Tilburg.

Net Neutrality and Inflation of Traffic. / Peitz, M.; Schütt, F.

Tilburg : Department of Economics, 2015. (CentER Discussion Paper; Vol. 2015-017).

Research output: Working paperDiscussion paperOther research output

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T1 - Net Neutrality and Inflation of Traffic

AU - Peitz, M.

AU - Schütt, F.

PY - 2015/3/3

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N2 - Under strict net neutrality Internet service providers (ISPs) are required to carrydata without any differentiation and at no cost to the content provider. We provide a simple framework with a monopoly ISP to evaluate different net neutrality rules. Content differs in its sensitivity to delay. Content providers can use congestion control techniques to reduce delay for their content, but do not take into account the effect of their decisions on the aggregate volume of traffic. As a result, strict net neutrality often leads to socially inefficient allocation of traffic and traffic inflation. We show that piece-meal departures from net neutrality, such as transmission fees or prioritization based on sensitivity to delay, do not necessarily improve efficiency. However, the ISP implements the efficient allocation when allowed to introduce bandwidth tiering and charge for prioritized delivery.

AB - Under strict net neutrality Internet service providers (ISPs) are required to carrydata without any differentiation and at no cost to the content provider. We provide a simple framework with a monopoly ISP to evaluate different net neutrality rules. Content differs in its sensitivity to delay. Content providers can use congestion control techniques to reduce delay for their content, but do not take into account the effect of their decisions on the aggregate volume of traffic. As a result, strict net neutrality often leads to socially inefficient allocation of traffic and traffic inflation. We show that piece-meal departures from net neutrality, such as transmission fees or prioritization based on sensitivity to delay, do not necessarily improve efficiency. However, the ISP implements the efficient allocation when allowed to introduce bandwidth tiering and charge for prioritized delivery.

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Peitz M, Schütt F. Net Neutrality and Inflation of Traffic. Tilburg: Department of Economics. 2015 Mar 3. (CentER Discussion Paper).