TAILIEUCHUNG - “Net Neutrality,” Non-Discrimination and Digital Distribution of Content Through the Internet*

The vast majority of . residential consumers face a monopoly or duopoly in broadband Internet access. Until now, the Internet has been characterized by a regime of “net neutrality,” which means there has been no discrimination between the price of transmitting packets based on the identity of either the transmitter or the identity of the receiver, based on the application, or the type of content the packet contains. Providers of DSL or cable modem Internet access in the United States are taking advantage of a recent regulatory change that effectively abolishes “net neutrality” and nondiscrimination protections. Due to their market power, these service providers are considering a variety of. | I S A JOURNAL OF LAW AND POLICY FOR THE INFORMATION SOCIETY Net Neutrality Non-Discrimination and Digital Distribution of Content Through the Internet Nicholas Economides Abstract The vast majority of . residential consumers face a monopoly or duopoly in broadband Internet access. Until now the Internet has been characterized by a regime of net neutrality which means there has been no discrimination between the price of transmitting packets based on the identity of either the transmitter or the identity of the receiver based on the application or the type of content the packet contains. Providers of DSL or cable modem Internet access in the United States are taking advantage of a recent regulatory change that effectively abolishes net neutrality and nondiscrimination protections. Due to their market power these service providers are considering a variety of discriminatory pricing schemes. This article discusses and evaluates the effect a number of these schemes would have on the prices and profitability of network access as well as the effect on complementary application and content providers. This article also discusses an assortment of anti-competitive effects created by price discrimination and evaluates the possibility of net neutrality being imposed by law. In an earlier draft of this article I benefited from comments by the following individuals Carla Bulford Richard Clarke David Gabel Bill Sharkey Peter Shane Scott Shenker Brian Viard and Glenn Woroch. I gratefully acknowledge financial support from the Newhouse Foundation and the Entertainment Media and Technology program of the Stern School of Business. Professor of Economics Stern School of Business . 44 West 4th Street New York NY 10012 212 998-0864 economides@ http networks and Executive Director NET Institute http . 210 I S A JOURNAL OF LAW AND POLICY Vol. 4 2 I. Introduction The Internet is a global interconnected network of computers that allows .

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