The Economics of Net Neutrality

The emergence of broadband networks - both wireline and wireless - has assisted in fostering the applications and content development, and provided content and application providers with a huge and growing addressable market with very low barriers to entry. However, there is always a tension between end-user connectivity providers and CAPs on the nuances of net neutrality, the principle that content consumed should be decided by the end-user without any distortion by the connectivity provider. While much attention has been paid to the technology dimensions of net neutrality, this paper addresses the economic dimensions, including access and termination pricing, the waterbed effect, and the two-sided nature of broadband markets. The paper also summarises regulatory views on net neutrality in the advanced countries such as the United States and the European Union and contrasts them with possibilities in emerging countries such as India.