Externalities between On-Line Contents Drive Telecom Operators’ Incentives to Provide Quality Open Internet Through Neutral Network

Abstract

The necessity of Net Neutrality (NN) rules to safeguard the open internet should be assessed in light of the history of broadband internet and empirical evidence. Actual or alleged “net neutrality breaches” have been marginal. The existence of strong positive externalities between internet Contents & Applications (C&A) and the requirement of compatibility of the C&A – network nterfaces to support those externalities imply that network operators have incentives to provide high quality open internet access based on a neutral network. This is not incompatible with offering in parallel and as complement specific C&As relying on proprietary information and using a priority access to the network (so-called “specialized services”). The specific nature of such C&As implies that they cannot represent substitutes to services available on internet access. The access provider is incentivized to provide an internet access service of good quality even if provides specialised service in parallel and as complement, because the former largely determines the value of the access service for the end-user. Such findings on the incentives of network providers should be taken into account when interpreting and assessing the Net neutrality rules.