Dynamic Effects of Network Neutrality

Abstract

Ideally, a choice between these different governance options would be based on a detailed evaluation of their static and dynamic efficiency implications. A systematic assessment is complicated by the fact that the multiple dynamic interactions in next generation networks render the issues intractable and prohibit an analytical determination of likely outcomes. This paper explores a different approach, the use of scenario thinking and simulation models to develop a better understanding of the dynamic effects of different policy approaches. The next section presents a stylized model of key interactions in a next-generation network and a reference scenario based on the absence of any specific network neutrality regulations. It focuses in particular on the innovation incentives of the stakeholders at the platform and at the application and services layers.

Subsequent sections explore how alternative network neutrality regimes would change the incentives of the stakeholders and the evolution of the overall system compared to the reference scenario. A full simulation of the dynamics of network neutrality policies is critically dependent on the strength of the interactions between the layers of the system. Additional work will have to be undertaken to narrow the range of possible parameters to a more manageable range.