Net Neutrality Rules Research Articles

Net neutrality and consumer demand in the video on-demand market

Proponents of Net Neutrality rules argue that these regulations prevent internet service providers (ISP) from slowing down content that competes with some of their own services (vertical foreclosure). To study these incentives, we measure consumers’ willingness to pay for speed on the video on-demand market. We use a survey experiment to estimate a differentiated-product demand system for choosing how to view specific content. We establish a necessary condition for ISPs to have an incentive for vertical foreclosure: consumers respond to reduced speeds by substituting to a service offered by the ISP. We also show that by eliminating vertical foreclosure, Net Neutrality could provide incentives for ISPs to compete on prices.

Net Neutrality from the Ground Up

In the long-running net neutrality debate, a key assumption has been that broadband and broadband Internet access service are “jurisdictionally interstate.” But are they really? And what does that mean? In practice, the interstate assumption has meant that important decisions about broadband law and policy -- whether online content delivery will be akin to the common carrier model of the legacy phone network or the entertainment model of the cable television industry, for instance – are made almost exclusively by the federal government. The “who decides” question took on new immediacy in 2017, when the Federal Communications Commission gutted federal net neutrality rules, and then attempted to preempt the states from adopting their own. Several states nevertheless enacted open network/non-discrimination laws; two of them (in California and Vermont) were promptly challenged on preemption grounds. This paper examines the interstate assumption “from the ground up.” It starts with wires in the ground and radio links to local cell towers, i.e., “last-mile” infrastructure without which there would be no broadband Internet access. It arrives at the conclusion that “jurisdictionally interstate” is more of a fictional construct than a factual description, one that expresses unexamined policy choices more than essential network attributes. It concludes by reflecting on alternate ways that federal, state, and local interests might more harmoniously be integrated in light of the network’s physical presence and the state laws that enable that presence.

Casting a Wide Net: The Federal Communication Commission’s Preemption of State Broadband Internet Regulation

In 2018, the FCC abruptly reversed course in the federal scheme for regulating the Internet. With its “Restoring Internet Freedom Order,” the FCC re-reclassified broadband Internet as an “information service,” and thus found it has no statutory authority to impose the net neutrality rules promulgated an earlier FCC in 2016. Nonetheless, the agency included a provision preempting state net neutrality laws or regulation. But it did so relying only on broad grants of regulatory authority and congressional policy. And in judicial review of that Order, the D.C. Circuit vacated the preemption portion of the Order, upholding the remainder of the administrative action. I argue that the FCC’s Order is a timely example of a modern administrative agency relying on expansive and broad statutory authority to preempt state law and getting it wrong. Doing so threatens to destabilize the already delicate balance of federalism implicated when the federal government implements its constitutional authority to preempt state law. Not only did the agency preempt state law after finding no statutory authority to impose the very laws it was preempting but arguably it relied on a broad reading of its delegated authority to do so. When exercising the power of preemption, special care is required for agencies no less Congress. This order simply does not pass muster. Ultimately, I argue the analysis the agency presented is informative as to the implications of the modern administrative state with federalism concerns.

On the Net Neutrality Efficiency under Congestion Price Discrimination

In this paper, we study the extent to which net neutrality, defined as price non-discrimination, is welfare improving in comparison to non-net-neutrality. We consider a two-sided congested internet service provider (ISP) that acts as a monopoly platform. The congestion is basically caused by the overuse of the fixed ISP’s bandwidth by content providers. Unlike end-users, we allow content providers to be heterogeneous in their sensitivity to congestion. The analysis reveals that the ISP monopolist, by departing from the net neutrality regime, price-favors the most congestion sensitive providers. We argue that these providers play a crucial role in creating traffic and generating profit for the ISP platform. In our paper, whether net neutrality improves or harms social welfare depends on a critical threshold of the platform equilibrium congestion level. This threshold is an indicator or a proxy that indicates for a planner whether or not net neutrality rules should be repealed. When the platform congestion level lies below the threshold, we show that non-net-neutrality makes the society better-off. Exceeding the threshold, two effects are identified: profit-increase effect and consumers’ surplus-reduction effect. If the latter outweighs the former, net neutrality increases social welfare when compared to non-net-neutrality.

Guest Editorial: Smart Data Pricing for Next-Generation Networks

The growing demand for mobile data and the evolution of next-generation networks, particularly fifth-generation (5G) wireless networks, has called for new approaches to pricing and managing the limited capacity of existing network resources and infrastructures. In particular, emerging mobile applications like autonomous vehicles, augmented/virtual reality, and more broadly the Internet-of-Things will have heterogeneous demand patterns and service requirements, raising questions on how they should pay for their data usage and how next-generation networks can meet their demands with limited resources. Several recent policy changes and regulatory initiatives have been proposed to address the shift in demands due to next-generation networks and technologies. These include the FCC’s “5G Fast Plan,” which outlines strategies for modifying spectrum policies, infrastructure policies, and existing regulations, in light of emerging 5G technologies. This plan has included the rollback of net neutrality rules in June 2018, allowing broadband providers to offer a wider variety of service options.

Investigating the intertwining impact of wholesale access pricing and the commitment to net neutrality principle on European next-generation access networks private investment plans: An options-game application for capturing market players' competitive interactions

Whilst the deployment of next generation access networks (NGANs) is undoubtedly beneficial to the economy, new legal developments in the United States (US) regarding the issue of net neutrality (NN) pose a new challenge not only to policy makers but to telecommunication providers as well, that could justify a fresh approach when assessing NGANs investments. In particular, the Federal Communications Commission (FCC) subverted extant NN rules in the US and if the European Union (EU) decides to follow a similar deregulatory path in the future it could change the way telecommunications providers on both sides of the Atlantic lay down their optical-fibre network infrastructure investment plans. For instance, if traffic prioritization is allowed then diversification of revenue sources can be achieved by charging customers for privileged data delivery to their premises. Currently, NGANs roll-out throughout EU is an ongoing process in a setting whereby access regulation in the form of network element unbundling is already imposed. As a result, these legal developments form a new context within which it makes sense to assess the role of NGANs wholesale access pricing in tandem with the degree of commitment to NN rules so as to i) determine their combinatorial impact on private telecommunications operators' financial figures and ii) capture their competitive interactions. Towards this end, an important aspect of particular value to market players (i.e. incumbents and competitive providers – CPs), and policy makers (i.e. National Regulatory Authorities – NRAs) that this article aims to examine is how to employ the option-game (OG) analysis, that reflects the intersection of game theory (GT) and real options (ROs), to model the competitive interactions between participants in a particular competition game set-up by means of deriving possible Nash-equilibrium (NE) outcomes within a regulatory setting part of which is the commitment or non-commitment to the NN principle. This, hybrid, evaluation tool is applied on top of a conventional discounted cash flow (DCF) techno-economic analysis assessment of an NGAN investment opportunity.

Washington Hotline

The fight for network neutrality continues, despite disappointing court rulingOn October 1, 2019, a three-judge panel of the U.S. Court of Appeals for the D.C. Circuit delivered a long-awaited and complex ruling on whether the Federal Communications Commission (FCC) had the authority to eliminate Obama-era network neutrality protections that required all Internet traffic to be treated equally and prohibited blocking or prioritizing traffic in any way. The issue hinges in part on the reclassification of broadband as a telecommunications service, which would have made Internet service providers subject to stricter regulations. The judges ruled in favor of the FCC, saying it does have the authority to determine how the Internet is regulated (or not, in this case). At the same time, the court also determined the FCC still has work to do, remanding parts of the order back for further proceedings and, most importantly, rejecting the FCC’s attempts to prevent states from passing their own net neutrality rules.

Net Neutrality and Its' Repeal: Small Firms' Shareholders Shrug While Large Firms' Shareholders Turn

The FCCs decision to repeal Net Neutrality governance of Internet traffic has not ended the debate over whether such protections are needed. This paper investigates the effects of changes in Net Neutrality regulation through an event study that unlike previous studies, employs as a baseline model, the Fama/French Three-Factor model to capture differences in rm size. The results are striking: for the most part, investors in both small and large firms are indifferent to changes in Net Neutrality rules. However, the selection of Chairman Pai is a signifi cant negative event for the group of largest rms. One explanation consistent with this finding is that the appointment of Pai gave a green light not only for Net Neutrality's repeal but also signalled that the FCC would take a favorable stance towards merger activity. Large firms in a given industry are more likely to operate as acquirers and therefore, more likely to realize losses in shareholder value.

Net neutrality and market power: The case of South Africa

Net neutrality rules have been implemented in many developed countries, often in response to concerns over network operator market power and potential blocking or throttling of content. However, developing countries typically have significantly lower levels of internet penetration and usage. Market power in respect of internet access looks quite different given that mobile is the predominant means of connection and there are often three or more mobile operators. In South Africa, there is a quasi-monopoly in the paid satellite broadcasting market and broadband providers zero-rating content from third parties (such as Netflix) may bring about more competition. We test the main theories of harm arising in the net neutrality debate, including network operator market power and exclusion among content providers using data on the number of announced prefixes and peers and IP addresses and considering examples of bundling and zero-rating conduct by operators. We find that net neutrality rules are less likely to be required in South Africa and other developing countries and that strict enforcement of such rules could in fact hinder competition in markets for content, telecommunications networks and other related markets.

A New Game in Town: Disseminating Sports Content in a Net Neutrality-Less Era—The Potential Implications for the Post-Broadcasting World

The Federal Communications Commission’s (FCC) repeal of the net neutrality rules has implications for the consumers of program content found on broadband internet service providers (ISPs). Under the former rule, such providers cannot engage in discrimination by favoring some content over others or by using their broadband to speed up favored content or slow down less favored content (practices known as “throttling”). With the demise of net neutrality, ISPs have the power to control what viewers see and how they see it, with few resources to fight such decisions. One key programming category is sports. The end of net neutrality can have an adverse impact to sports streams, because of the high amounts of broadband space and the rapid consolidation between sports content providers and ISPs. This article discusses the background of the powers of the FCC, the history of the net neutrality rules, the FCC’s 2018 order repealing the rules, and the legal and political reactions to it. It concludes by raising a number of hypothetical situations where the lack of net neutrality can have an adverse impact for consumers of sports material.

The Implications of the FCC’s Net Neutrality Repeal

In December 2017, the Federal Communications Commission (FCC) repealed US net neutrality regulation. The author discusses the meaning and importance of net neutrality, the FCC’s prior net neutrality rules and the implications of their repeal.

Net Neutrality and Mobile App Innovation in Denmark and Netherlands 2010–2016

Abstract Net neutrality or “Open Internet” rulemaking has been ongoing for more than a decade. Some 50 nations have adopted formal rules including the US (then repealed), the European Union, India, and many countries in Latin America. Among other arguments, it is asserted that net neutrality rules are necessary for application innovation. While the focus for policymakers has largely been to make rules, there is less attention on how to measure the impact of such rules and how well they achieve their innovation goals. The article summaries a specific research investigation to what degree the introduction of rules in a given country stimulates innovation in that country’s mobile app ecosystem. The focus in on mobile networks because it allowed the most consistent data across countries. The study covered 53 countries, their net neutrality policies (or lack thereof), and the results to the respective mobile application ecosystems of the countries adopting rules between the period of 2010–2016. This investigation tests the proposition that countries which adopt net neutrality rules should experience an increase in mobile app development innovation within their national economy. To test this, a statistical methodology was developed based upon measuring the number of locally developed mobile apps in the country for relevant periods before and after rules are imposed and the corresponding app downloads, usage, and revenue. Measurement was conducted with two independent toolsets and adjusted for the sophistication and penetration of advanced mobile networks in the country. To make more meaningful comparisons and avoid inevitable heterogeneity across the countries, the investigation focuses on two similar countries with different rules, Denmark with soft rules (self-regulation) and Netherlands with hard rules (legislation). The study reviewed the leading theories of innovation as well as the foundational papers in net neutrality to explain the observed discrepancies. The research finds significant statistical support for “soft” net neutrality measures adopted on a voluntary basis. Hard rules adopted through legislation and regulation were not associated with greater mobile app development for the given country. Denmark increased in local mobile app development while Netherlands decreased. Additionally, the explosion of mobile apps from countries with no net neutrality rules and the general dearth of mobile apps from countries which have had hard rules for years runs counter to expected results. This suggests that policymakers revisit their assumptions and expectations for net neutrality policy.

Fighting for the Internet: Online Blackout Protests and Internet Legislation in the United States, 1996-2018

Fighting for the Internet: Online Blackout Protests and Internet Legislation in the United States, 1996-2018

Implications of the Reversal of Net Neutrality Rules and Next Steps to Protect the Open Internet

Implications of the Reversal of Net Neutrality Rules and Next Steps to Protect the Open Internet

(Why) Did EU Net Neutrality Rules Overshoot the Mark? Internet, Disruptive Innovation and EU Competition Law & Policy

This essay raises a number of theses in support for a more liberalised approach to EU Net Neutrality rules. It offers a graded system of levels of regulatory intervention, arguing that soft Net Neutrality rules are capable of meeting all positive objectives of regulation without causing the problems generated by hard Net Neutrality rules, such as those currently in place in the EU. Hard Net Neutrality rules prevent Internet Service Providers (ISPs) from making disruptive innovations. Meanwhile, they enable some Content and Application Providers (CAPs) to monopolise many markets via (disruptive) innovations, resulting in newly established dominant positions which have, in many instances, been abused. The hypothesis of the essay is that loosening the rules on Net Neutrality would create competition between ISPs and CAPs as well as (which is even more important) between different CAPs for limited premium speed traffic. Such newly established competition could remedy some antitrust conundrums faced by EU competition enforcers and sectorial regulators vis-à-vis disruptive innovators in the area of electronic communications.

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

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.

Net Neutrality: An Incyte Perspective responding to recent developments in the European Union

The road to net neutrality within the European Union (EU) has been slow and winding. However, a major milestone was reached in August 2016 through the publication of the BEREC Guidelines on the Implementation by National Regulators of European Net Neutrality Rules. These Guidelines, which must be given the “utmost consideration” by national regulators, provide the EU’s first detailed and unambiguous regulatory commitment to net neutrality, and are carefully crafted to balance the needs of content providers and network operators. This extended article explores the scope of the net neutrality principle as understood and applied in a number of jurisdictions. The approach in the EU is contrasted with the approaches of the Federal Communications Commission (FCC) in the United States (US) and of a number of other countries. Although there are some constants that recur for net neutrality in all of the countries examined, there remain a variety of specific local connotations.The article indicates that the question, “What is net neutrality?” will continue to be asked and continue to be very apposite for some time. The EU approach, with the BEREC Guidelines, will likely be central to a more harmonised approach worldwide.It also argues that the new EU framework is likely to be even more influential than its highly publicized but politically fractious US equivalent. The EU approach to net neutrality will find greater favour among developing countries, as it provides sufficient flexibility to offer network investment incentives whilst retaining appropriate competition and user safeguards. As with the earlier EU ex-ante regulatory frameworks for market analysis and cost-based interconnection, the BEREC paper paves the way for continued export of best practice regulation from the EU to the rest of the world. However, there are issues that demand caution in how the BEREC approach might be implemented.The authors have extensive experience as consultants and commentators on telecommunications industry and regulatory issues in many countries. David Rogerson and Jim Holmes are founding partners of Incyte Consulting, located in Falkirk (Scotland) and Melbourne, respectively. Pedro Seixas is a Principal Associate of Incyte Consulting located in Frankfurt.

Net Neutrality: An Incyte Perspective responding to recent developments in the European Union

The road to net neutrality within the European Union (EU) has been slow and winding. However, a major milestone was reached in August 2016 through the publication of the BEREC Guidelines on the Implementation by National Regulators of European Net Neutrality Rules. These Guidelines, which must be given the “utmost consideration” by national regulators, provide the EU’s first detailed and unambiguous regulatory commitment to net neutrality, and are carefully crafted to balance the needs of content providers and network operators. This extended article explores the scope of the net neutrality principle as understood and applied in a number of jurisdictions. The approach in the EU is contrasted with the approaches of the Federal Communications Commission (FCC) in the United States (US) and of a number of other countries. Although there are some constants that recur for net neutrality in all of the countries examined, there remain a variety of specific local connotations.The article indicates that the question, “What is net neutrality?” will continue to be asked and continue to be very apposite for some time. The EU approach, with the BEREC Guidelines, will likely be central to a more harmonised approach worldwide.It also argues that the new EU framework is likely to be even more influential than its highly publicized but politically fractious US equivalent. The EU approach to net neutrality will find greater favour among developing countries, as it provides sufficient flexibility to offer network investment incentives whilst retaining appropriate competition and user safeguards. As with the earlier EU ex-ante regulatory frameworks for market analysis and cost-based interconnection, the BEREC paper paves the way for continued export of best practice regulation from the EU to the rest of the world. However, there are issues that demand caution in how the BEREC approach might be implemented.The authors have extensive experience as consultants and commentators on telecommunications industry and regulatory issues in many countries. David Rogerson and Jim Holmes are founding partners of Incyte Consulting, located in Falkirk (Scotland) and Melbourne, respectively. Pedro Seixas is a Principal Associate of Incyte Consulting located in Frankfurt.

Net neutrality and inflation of traffic

Under strict net neutrality Internet service providers (ISPs) are required to carry data without any differentiation and at no cost to the content provider. We provide a simple framework with a monopoly ISP to evaluate the short-run effects of different net neutrality rules. Content differs in its sensitivity to delay. Content providers can use congestion control techniques to reduce delay for their content, but do not take into account the effect of their decisions on the aggregate volume of traffic. As a result, strict net neutrality often leads to socially inefficient allocation of traffic and traffic inflation. We show that piece-meal departures from net neutrality, such as transmission fees or prioritization based on sensitivity to delay, do not necessarily improve efficiency. However, the ISP implements the efficient allocation when allowed to introduce bandwidth tiering and charge for prioritized delivery.

Zero Ratings and the Public Interest: Pushing Regulatory Limits for the Common Good

Nearly two-thirds of Americans use smartphones to access the Internet. Among these users, 10 percent of Americans who own a smartphone do not have any other form of high-speed Internet access at home beyond their basic data plan, while others have no data plan at all. According to recent data from Pew Research Center, vulnerable populations that include low-income and less literate populations are more likely to be smartphone-dependent when compared to others that are less reliant on their mobile devices. Further, these same populations also tend to be unbanked, uninsured, transient, or those living with other family members and friends.Given these life circumstances and how certain populations are accessing the Internet, it is imperative that regulatory policies encourage consumer access to critical information that include employment, education, health-related resources, and government services. While reforms to make the cost of broadband affordable are significant in supporting vulnerable groups, programs that offer free or low-cost online content to these groups should be equally encouraged.In 2015, the Federal Communications Commission’s (FCC) Open Internet, or net neutrality rules, prescribed standards around consumers’ accessibility to online content. In particular, these rules, primarily directed to certain network operators or Information Service Providers (ISPs), prohibit the blocking of online content, services, applications, and devices; and discouraged the unreasonable degradation of certain online traffic. The Open Internet rules also ban the throttling and prioritizing of traffic, and institute “common carriage,” or a Title II framework that applies to both wireline and wireless services. While many scholars concluded that the 2015 Open Internet rules delivered the essential elements requested by the net neutrality advocates, the FCC also permitted under the net neutrality framework zero-rated services that, if viewed as pernicious, could be subjected to the “general conduct standard” that prohibits unreasonable conduct by ISPs, particularly when there are perceived consumer harms or anti-competitive behaviors. By definition, zero rating is the practice of offering online content at no cost, or free, to consumers. The content can direct consumers to certain online content, or a series of web sites, again for free, in a manner that doesn’t count against consumers’ data caps or, in some cases, can be accessed without an existing data plan. In some business arrangements between network operators and content providers, zero-rated services do not have an exchange of funds between the distributor and the content creator, while in other instances, the foregone costs are reimbursed to operators through a practice referred to as “sponsored data.” Given this definition, this paper will argue that zero rating, online content has a direct public and consumer benefit in buffering the economic vulnerabilities associated with unmanaged online data use that usually results in fees and surcharges due to consumer overages. This paper will also discuss that this practice also provides the incentive to consumers and carriers to access the more socially beneficial aspects of the Internet, simply because they have the data. This paper will dive into the arguments that present these practices as net neutrality violations and share case studies on companies that are deploying zero-rated services. Finally, this paper will assert that any blanket ban of this practice by the FCC runs counter to the agency’s Open Internet bright line rules and has the potential to choke the experimentation of services that could potentially accelerate broadband access.