Abstract
We consider zero-rating by Internet service providers. We analyze the implications of offering sponsored data plans that allow content providers to pay for traffic on behalf of their consumers. These plans boost consumption of high-value content and decrease the networks’ incentives to exclude low-value content. The welfare effect of allowing this price discrimination depends on the proportion of content targeted and the value of contents. Our analysis is extended to various cases (one-sided pricing, competing network, heterogenous cost, paid content).
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