Net neutrality versus discrimination in internet access: winners, losers and investment incentives

According to Neelie Kroes, the European Commission Responsible for the Digital Agenda, ‘the internet is a great place to exercise and enjoy liberty’. To hold true this requires that users must be free of restrictions on their access to content and use of services. Thus, supporters of the principle of ‘net neutrality’ assert that internet service providers should be legally prevented from discriminating between different types of web traffic. On the other hand, some Internet Service Providers (ISPs) oppose net neutrality on the grounds that prioritisation of bandwidth is necessary for future innovation and investment. This paper provides constructive input to the debate on net neutrality by comparing the pay-off of internet service providers, content providers and users under the two opposing regimes of discrimination and net neutrality. In particular, through a game-theory model, we analyse gainers, losers and investment incentives in a duopolistic market, under the two scenarios.