Access to Audio-visual Contents, Exclusivity and Anticommons in New Media Markets

Media markets are characterized by strong peculiarities that often call for longterm exclusivity contracts between content providers and distributors or for vertical or horizontal integration. This paper analyzes and compares the economic effects of existing alternative systems of access to valuable content for new media platforms, under the lens of technological convergence and 'network neutrality'. The analysis suggests the increasing need for a coordinated regulatory framework aimed at balancing costs and benefits of the different models in order to ensure that the development of new markets and new technologies in the age of media convergence is not hindered by "anticommons" tragedies.contents, new media, anticommons, antitrust.

Competing one-way essential complements: the forgotten side of net neutrality

Abstract We analyze the incentives of internet service providers (ISPs) to break net neutrality by excluding internet applications competing with their own products, a typical example being the exclusion of VoIP applications by telecom companies offering internet and voice services. Exclusion is not a concern when the ISP is a monopoly because it can extract the additional surplus created by the application through price rebalancing. When ISPs compete, it could lead to a fragmented internet where only one firm offers the application. We show that, both in monopoly and duopoly, prohibiting the exclusion of the app and surcharges for its use -a strong form of net neutrality-is not welfare improving. JEL classification: L12 L13 L51 L9

The economic effects of network neutrality: a policy perspective

Network neutrality - regulation of Internet service providers (ISPs) to ensure equal treatment of all traffic - is becoming something many people have heard about. While the context is technical, network neutrality ultimately boils down to economics. The political weight of the subject is heavy, and the international debate is fierce. Still, surprisingly little rigorous research appears to be behind it. In this paper, I review economic literature on network neutrality and ISP regulation, covering both practical and theoretical implications for the broadband market. I define the degrees of network neutrality with more granularity than papers so far, evaluate the qualitative economic effects of regulation, and describe the broadband market, frameworks for modeling it, and its peculiar economic characteristics. In particular, I review and compare different theoretical modeling approaches and models' predictions of the welfare effects of different regulatory regimes. Throughout the paper, I incorporate economic literature from relevant areas into the analysis. I do not make definite policy recommendations, but I draw conclusions that are potentially of interest from a policy point of view. My analysis would indicate that the complexity of the Internet ecosystem and interrelations between market participants make effective regulation difficult. There is no economic evidence that network neutrality generally increases total welfare. In fact, it turns out that from a well-rounded economic perspective, strong network neutrality appears in most cases as detrimental to both consumer surplus and total welfare. In certain scenarios, however, models predict that neutrality can increase static and dynamic efficiency. The results depend crucially on model specifications and parameters, which differ significantly across the literature. So far, there is no consensus among economists on the optimal level of ISP regulation. Market-driven solutions such as dynamic pricing might provide a way to circumvent the neutrality question. Verkkoneutraliteetti - teleoperaattorien sääntely tietoliikenteen tasa-arvoisen kohtelun varmistamiseksi - on astunut käsitteenä julkisuuteen. Vaikka konteksti onkin tekninen, verkkoneutraliteetti viime kädessä redusoituu taloustieteeseen. Aiheen poliittinen painoarvo on suuri ja kansainvälinen keskustelu kiivasta. Tästä huolimatta sen takaa vaikuttaa löytyvän yllättävän vähän tieteellistä tutkimusta. Lopputyössäni tarkastelen taloustieteellistä kirjallisuutta verkkoneutraliteetista ja teleoperaattorien sääntelystä ja sen vaikutuksia laajakaistamarkkinaan käytännöllisestä kuin myös teoreettisesta näkökulmasta. Määrittelen verkkoneutraliteetin asteet hienojakoisemmin kuin aikaisemmat julkaisut, arvioin sääntelyn laadullisia vaikutuksia ja kuvailen laajakaistamarkkinaa, viitekehyksiä sen mallintamiseksi sekä sen eriskummallisia taloudellisia piirteitä. Kuvaan teoreettisia lähestymistapoja ja merkittävimpien mallien ennusteita sääntelymallien hyvinvointivaikutuksista. Liitän analyysini relevanttiin taloustieteelliseen kirjallisuuteen. En anna suoria politiikkasuosituksia, mutta teen johtopäätöksiä, jotka ovat mahdollisesti mielenkiintoisia poliittisesta näkökulmasta. Analyysini perusteella vaikuttaa, että Internet-ekosysteemin monimutkaisuus ja toimijoiden väliset suhteet tekevät tehokkaasta sääntelystä vaikeaa. Taloustieteellistä näyttöä verkkoneutraliteetin hyvinvointia kasvattavista vaikutuksista ei ole. Tasapainoisesta taloudellisesta näkökulmasta katsottuna tiukka neutraliteettisääntely näyttää useimmissa tapauksissa sekä pienentävän kuluttajan ylijäämää että laskevan kokonaishyvinvointia. Joissakin skenaarioissa mallit toisaalta ennustavat neutraliteetin lisäävän staattista ja dynaamista tehokkuutta. Tulokset riippuvat rajusti mallin rakenteesta ja parametreistä, jotka vaihtelevat merkittävästi tutkimuksesta tutkimukseen. Toistaiseksi taloustieteilijät eivät ole päässeet yhteisymmärrykseen optimaalisesta teleoperaattorien sääntelyn asteesta. Markkinalähtöiset ratkaisut kuten dynaaminen hinnoittelu saattavat mahdollistaa neutraliteettikysymyksen kiertämisen

Net Neutrality, Prioritization and the Impact of Content Delivery Networks

We analyze competition between Internet Service Providers (ISPs) where consumers demand heterogeneous content within two Quality-of-Service (QoS) regimes, Net Neutrality and Paid Prioritization, and show that paid prioritization increases the static efficiency compared to a neutral network. We also consider paid prioritization intermediated by Content Delivery Networks (CDNs). While the use of CDNs is welfare neutral, it results in higher consumer prices for internet access. Regarding incentives to invest in network capacity we show that discriminatory regimes lead to higher incentives than the neutral regime as long as capacity is scarce, while investment is highest in the presence of CDNs

Asset Specificity and Transaction Structures: A Case Study of @Home Corporation

This is a case study of asset specific investments, a class of transactions that is well understood in the context of economic theory but that is under-analyzed empirically. Because specific investments are particular to a single location, use or customer, their next best use is of much lower value than the use for which they are initially intended. Consequently, asset specific investments face the threat of ex post opportunism and allocative inefficiency. This contracting problem is particularly difficult when firms that are otherwise rivals must coordinate individual investments to create a shared resource. In such cases, generating credible expectations of cooperation among rivals is critical to coordinating these investments. The case of @Home Corporation is an example of how rival cable companies were able to employ “hybrid” structures including contractual safeguards like joint ownership, specialized governance devices and economic lock-in to overcome the problem of asset specificity and then build out a nationwide cable-based online service network during the 1990s. As the market subsequently develope alternatives to @Home, the economic lock-in required to induce cooperation failed to materialize, and @Home collapsed. The ultimate failure of @Home points out that those strategies that provide the proper ex ante incentives many not always be durable, leaving contracting parties with less than perfect options

2020 Media Futures

What will our media and entertainment be like in 2020

Moore’s Law, Metcalfe’s Law, and the Theory of Optimal Interoperability

Many observers attribute the Internet’s success to two principles: Moore’s Law and Metcalfe’s Law. These precepts are often cited to support claims that larger networks are inevitably more valuable and that costs in a digital environment always decrease. This Article offers both a systematic description of both laws and then challenges the conventional wisdom by exploring their conceptual limitations. It also explores how alternative mechanisms, such as gateways and competition, can permit the realization benefits typically attributed to Moore’s Law and Metcalfe’s Law without requiring increases in network size

Net neutrality: a fast lane to understanding the trade-offs

The “net neutrality” principle has triggered a heated debate and advocates have proposed policy interventions. In this paper, we provide perspective by framing issues in terms of the positive economic factors at work. We stress the incentives of market participants, and highlight the economic conflicts behind the arguments put forward by the different parties. We also identify several key open questions

Is the Repeal of Net Neutrality a Necessary Evil? An Empirical Analysis of Net Neutrality and Cybercrime

While net neutrality guarantees equal access to the Internet and online content, it serves as a limiting factor in identifying and tracking criminal activities in cyberspace by ensuring that data packet is transmitted with equal priority, irrespective of its source and content. Exploiting a natural experiment in which net neutrality policies were officially repealed in 2018 in the United States, this study examines the impact of net neutrality on the occurrence of cybercrime. Our findings suggest that the repeal of net neutrality is negatively associated with the occurrence of malicious code and content in an attempt to compromise computer systems (e.g., malware and ransomware). In contrast, we do not find any significant relationship with cybercrime victimization, and cybercrime that may subsequently occur in compromised systems (e.g., data breaches and denial-of-service attacks). This study provides novel insights into the role of net neutrality and open Internet toward the preventive cybersecurity paradigm