Zero-Rating of Content and Its Effect on the Quality of Service in the Internet

Abstract

The ongoing net neutrality debate has generated a lot of heated discussions on whether or not monetary interactions should be regulated between content and access providers. Among the several topics discussed, ‘differential pricing’ has recently received attention due to ‘zero-rating’ platforms proposed by some service providers. In the differential pricing scheme, Internet Service Providers (ISPs) can exempt data access charges for on content from certain CPs (zero-rated) while no exemption is on content from other CPs. This allows the possibility for Content Providers (CPs) to make ‘sponsorship’ agreements to zero-rate their content and attract more user traffic. In this article, we study the effect of differential pricing on various players in the Internet. We first consider a model with a monopolistic ISP and multiple CPs where users select CPs based on the quality of service (QoS) and data access charges. We show that in a differential pricing regime 1) it is possible for a CP to obtain higher utility than a CP offering better QoS through higher subsidy at user equilibrium 2) Overall QoS (mean delay) for end users can degrade under differential pricing schemes. In the oligopolistic market with multiple ISPs, ISPs tend to set equal access prices at equilibrium and similar conclusions are derived as in the monopolistic market.