Internet Economics Workshop Notes

Bailey, Joseph P.; Gillett, Sharon; Gingold, David; Leida, Brett; Melcher, Douglas; Reagle, Joseph; Roh, Jae Hun; Rothstein, Russell

doi:10.3998/3336451.0001.138

Cited by 2 publications

(3 citation statements)

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“…This is precisely the place where public good provisioning fails. There will be costs if we want to preserve [Internet access] as a private good” (Bailey et al, ). Hal Varian of Michigan, who is now Google's Chief Economist, explained that “If there is a monopolistic supplier [of Internet access], then he can abuse the system.…”

Section: Some Basic Internet Economicsmentioning

confidence: 99%

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Is the U.S. Government's Internet Policy Broken?

Hahn¹,

Singer²

2013

Policy &Amp; Internet

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Professor Susan Crawford has just published a thought‐provoking book on the future of high‐speed Internet access in the United States. At the risk of oversimplifying, Crawford's argument can be summarized in three sentences. Americans need really fast Internet. The market has failed to supply this Internet. Government needs to introduce a “utility model,” where high‐speed fiber is made available to everyone at reasonable prices. While Crawford highlights some problems with the current market structure for high‐speed Internet services, including important problems with the merger approval process, we feel that she does not provide a fair and balanced view of Internet competition in the United States; in particular, she does not take into account appropriate economic considerations, nor does her policy proposal represent the only reasonable response to the alleged problem. This review article explains that why broadband should not be considered a public good, and why the provision of broadband should not be characterized as a natural monopoly. It also presents some alternative approaches to the policy issues raised in Crawford's book; in contrast to her support of net neutrality, we explain why quality‐of‐service contracts between access providers and websites should be presumptively procompetitive, and that complaining websites should be compelled to reverse that presumption with strong evidence of discrimination.

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Section: Some Basic Internet Economicsmentioning

confidence: 99%

“…Therefore, we need to encourage methods to provide for a competitive market. Sensible pricing is necessary to support a competitive market for network provision” (Bailey et al, ) . If Varian believed that network provision was a public good, then he would not embrace market forces for its provision.…”

Section: Some Basic Internet Economicsmentioning

confidence: 99%

Is the U.S. Government's Internet Policy Broken?

Hahn¹,

Singer²

2013

Policy &Amp; Internet

View full text Add to dashboard Cite

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“…Moreover, it is stated that such pricing policies would only provide a disincentive for capital investment because they discourage usage and are contrary to customers' desires for price simplicity (Odlyzko 2000). Critics of pricing-based network resource allocation further claim that a lower level of capital investment, paired with pricing, will result in a segmentation of the user base with a high level of service given to those who can afford the service and a very poor level of service or no service at all to those who cannot afford the service, or at least a certain level of service (e.g., Bailey et al 1995). Many researchers have refuted the notion of unlimited bandwidth as overly optimistic (e.g., .…”

Section: Introductionmentioning

confidence: 98%

An Analysis of Incentives for Network Infrastructure Investment Under Different Pricing Strategies

Gupta

Jukić

Stahl

et al. 2011

Information Systems Research

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T he Internet is making a significant transition from primarily a network of desktop computers to a network variety of connected information devices such as personal digital assistants and global positioning systembased devices. On the other hand, new paradigms such as overlay networks are defining service-based logical architecture for the network services that make locating content and routing more efficient. Along with Internet2's proposed service-based routing, overlay networks will create a new set of challenges in the provision and management of content over the network. However, a lack of proper infrastructure investment incentive may lead to an environment where network growth may not keep pace with the service requirements. In this paper, we present an analysis of investment incentives for network infrastructure owners under two different pricing strategies: congestion-based negative externality pricing and the prevalent flat-rate pricing. We develop a theoretically motivated gradient-based heuristic to compute maximum capacity that a network provider will be willing to invest in under different pricing schemes. The heuristic appropriates different capacities to different network components based on demand for these components. We then use a simulation model to compare the impact of dynamic congestion-based pricing with flat-rate pricing on the choice of capacity level by the infrastructure provider. The simulation model implements the heuristic and ensures that near-optimal level of capacity is allocated to each network component by checking theoretical optimality conditions. We investigate the impact of a variety of factors, including the per unit cost of capacity of a network resource, average value of the users' requests, average level of users' tolerance for delay, and the level of exogenous demand for services on the network. Our results indicate that relationships between these factors are crucial in determining which of the two pricing schemes results in a higher level of socially optimal network capacity. The simulation results provide a possible explanation for the evolution of the Internet pricing from time-based to flat-rate pricing. The results also indicate that regardless of how these factors are related, the average stream of the net benefits realized under congestion-based pricing tends to be higher than the average net benefits realized under flat-rate pricing. These central results point to the fallacy of the arguments presented by the supporters of net neutrality that do not consider the incentives for private investment in network capacity.

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Internet Economics Workshop Notes

Cited by 2 publications

References 0 publications

Is the U.S. Government's Internet Policy Broken?

Is the U.S. Government's Internet Policy Broken?

An Analysis of Incentives for Network Infrastructure Investment Under Different Pricing Strategies

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