Net Neutrality on the Internet: A Two-sided Market Analysis
We discuss the benefits of net neutrality regulation in the context of a two-sided market model in which platforms sell Internet access services to consumers and may set fees to content and applications providers "on the other side" of the Internet. When access is monopolized, we find that generally net neutrality regulation (that imposes zero fees "on the other side" of the market) increases total industry surplus compared to the fully private optimum at which the monopoly platform imposes positive fees on content and applications providers. Similarly, we find that imposing net neutrality in duopoly increases total surplus compared to duopoly competition between platforms that charge positive fees on content providers. We also discuss the incentives of duopolists to collude in setting the fees "on the other side" of the Internet while competing for Internet access customers. Additionally, we discuss how price and non-price discrimination strategies may be used once net neutrality is abolished. Finally, we discuss how the results generalize to other two-sided markets.
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Nicholas Economides is an expert on the economics of networks, telecommunications, computers, information, the economics of technical compatibility and standardization, the structure and organization of financial markets, and on the application of public policy to network industries, and the strategic analysis of markets. He has published widely in the areas of networks, telecommunications, oligopoly, antitrust, product positioning, and on the liquidity and the organization of financial markets and exchanges.
He holds a Ph.D. and a M.A. in Economics from the University of California at Berkeley, as well as a B.Sc. (First Class Honors) in Mathematical Economics from the London School of Economics. He has previously taught at Columbia University (1981-1988) and at Stanford University (1988-1990).
He is editor of the International Journal of Industrial Organization, Netnomics, Quarterly Journal of Electronic Commerce, the Journal of Financial Transformation, Journal of Network Industries, and on the Advisory Board of the Social Science Research Network. His web site on the Economics of Networks at has been ranked as one of the top 5 economics sites worldwide by The Economist magazine. He is advisor to the U.S. Federal Trade Commission, the governments of Ireland, New Zealand, and Portugal, major telecommunications corporations, a number of the Federal Reserve Banks, the Bank of Greece, and major Financial Exchanges. He serves on the Board of Longitude, Inc. and the Advisory Board of the Economist Intelligence Unit.