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Journal of Regulatory Economics

, Volume 55, Issue 2, pp 140–171 | Cite as

Net neutrality and asymmetric platform competition

  • Marc Bourreau
  • Romain LestageEmail author
Original Article

Abstract

In this paper we analyze the interplay between access to the last-mile network and net neutrality in the market for Internet access. We consider two competing Internet service providers (ISPs), which act as platforms between Internet users and content providers (CPs). One of the ISPs is vertically integrated and provides the other (non-integrated) ISP with access to its last-mile network. We study the impact of the access price on the termination fees charged by the ISPs to CPs for carrying their traffic. First, we show that the termination fee set by the integrated ISP decreases with the access price, whereas the termination fee of the non-integrated ISP can either increase or decrease with it. Second, we show that there exists a negative relationship (“waterbed effect”) between the access price and the total termination fee paid by the CPs. As a consequence, it may be socially optimal for the regulator to set the access price above cost when termination fees are left to the market.

Keywords

Net neutrality Access regulation Internet access Two-sided markets 

JEL Classification

L13 L5 L96 

Notes

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Copyright information

© Springer Science+Business Media, LLC, part of Springer Nature 2019

Authors and Affiliations

  1. 1.Department of Economics and Social SciencesTelecom ParisTechParisFrance
  2. 2.School of Management and EngineeringCentral University of Finance and EconomicsBeijingPeople’s Republic of China

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