The Net Neutrality Debate: Analysis of economic implications of net neutrality on internet service providers, content providers and internet users

This thesis studies the economic implications of a transition from a neutral to a non-neutral network. A mathematical model with an end to end ecosystem is developed, which includes a backbone internet service provider that provides connectivity for the content providers. The model also includes internet users that pay an access internet service provider for connectivity to interact with the content providers, advertisers that pay the content providers, and access internet service providers that charge the internet users for their connectivity. In the non-neutral regime, the content providers can pay the access internet service provider to access specialized services, a priority lane. The model is solved in a non-cooperative two stage game, and where the backbone and access internet service providers maximize their individual profits. Our analysis shows that the non-neutral unregulated regime always improves social welfare, investment and innovation levels, and lowers the congestion levels. We also show that the backbone internet service provider is always better off in the non-neutral regime, and therefore reduce the benefit of the other players. The result for the other players is generally positive in favor of a non-neutral regime, but much more ambiguous, especially for the access internet service providers. We also show that moderate regulation can increase social welfare. However, even moderate regulation might severely impair individual players, and too much regulation may also impair the non-neutral regime so that the overall social welfare is worse than in the neutral regime