Power-Law Distributions in a Two-sided Market and Net Neutrality

"Net neutrality" often refers to the policy dictating that an Internet service provider (ISP) cannot charge content providers (CPs) for delivering their content to consumers. Many past quantitative models designed to determine whether net neutrality is a good idea have been rather equivocal in their conclusions. Here we propose a very simple two-sided market model, in which the types of the consumers and the CPs are {\em power-law distributed} --- a kind of distribution known to often arise precisely in connection with Internet-related phenomena. We derive mostly analytical, closed-form results for several regimes: (a) Net neutrality, (b) social optimum, (c) maximum revenue by the ISP, or (d) maximum ISP revenue under quality differentiation. One unexpected conclusion is that (a) and (b) will differ significantly, unless average CP productivity is very high

The future of the USO - Economic rationale for universal services and implications for a future-oriented USO

Universal service obligations (USO) in the postal sector currently enjoy considerable attention among politicians, practitioners and academics. The primary areas of interest have been the viability, costing and funding of the USO in a completely liberalized market. However, the purpose and the scope of the USO itself have so far not been questioned fundamentally. In this paper we first analyze the possible rationale for USO from an economic point of view. Then, we discuss the impact of converging postal and telecommunications markets on potential alternative means to provide USO in a more efficient way.Universal service, USO, covergence, postal sector

A theory of the non-neutrality of money with banking frictions and bank recapitalization

The unconventional monetary policy actions of the Federal Reserve during the recent Global Financial Crisis often involve implicit subsidies to banks. This paper offers a theory of the non-neutrality of money associated with capital injection into banks via nominal transfers, in an environment where banking frictions are present in the sense that there exists an agency problem between banks and their private-sector creditors. The analysis is conducted within a general equilibrium setting with two-sided financial contracting. We first show that even with perfect nominal flexibility, the recapitalization policy has real effects on the economy. We then introduce banking riskiness shocks and study optimal policy responses to such shocks.Bankruptcy of banks; banking riskiness shocks; two-sided debt contract; unconventional monetary policy; financial crisis

Telecommunications, the Transition from Regulation to Antitrust

In recognition of the fact that the competition among telecommunications platforms that demands deregulation is not ubiquitously effective, I endorse and expatiate on the objective 'bright line' test proposed by the Canadian company TELUS for determining when and within what geographic market boundaries to deregulate. In accordance with that test, I then discuss the nature of the antitrust policy upon which falls responsibility for preserving the competition that is the logical surrogate for direct regulation. Following the rule of reason prescribed by the United States Supreme Court 95 years ago, I would have that policy concentrate on the behavior of the incumbent access providers and the intent that may logically be inferred from it. Finally, applying the two preceding expositions to the highly politically charged, largely ideological demands for a legislatively imposed rule of "network neutrality," I contend that if the two previously recommended policies are followed, such a legislative mandate would be both supererogatory and counterproductive.Technology and Industry, Regulatory Reform

Pricing Sponsored Data Plans in Two-Sided Markets

This thesis shows that a monopoly Internet Service Provider will never offer zero-rated mobile data plans for homogenous consumers if it cannot ask content providers to pay for the traffic increase caused by to zero-rating. Increasing the data allowance will result in similar utility gains for the customers than zero-rating some content, with lower or identical costs for the Internet Service Provider. When a monopoly Internet Service Provider is allowed to collect payments from content providers, prices to both sides of the market are determined by the size of the data allowance. Opposing effects of distorted consumption towards the zero-rated content and increased total consumption of data mean that total welfare effects remain ambiguous and depend on the parameter values

Two-Sided Markets and Electronic Intermediaries

The object of this paper is to discuss on-line intermediation from the perspective of two-sided markets. It builds a simple model of the intermediation activity when trading partners are involved in a commercial relationship and uses it to illustrate some of the results that emerge in the two-sided market literature, as well as to discuss some new aspects. The first part concentrates on a monopoly intermediation service and discusses both efficient pricing and monopoly pricing. The second part discusses the nature of competition between intermediaries, addressing issues as competitive crosssubsidies, multi-homing or tying.intermediation, two-sided market, network, cross-subsidy, tying