Journal of Regulatory Economics

, Volume 55, Issue 2, pp 140–171 | Cite as

Net neutrality and asymmetric platform competition

  • Marc Bourreau
  • Romain LestageEmail author
Original Article


In this paper we analyze the interplay between access to the last-mile network and net neutrality in the market for Internet access. We consider two competing Internet service providers (ISPs), which act as platforms between Internet users and content providers (CPs). One of the ISPs is vertically integrated and provides the other (non-integrated) ISP with access to its last-mile network. We study the impact of the access price on the termination fees charged by the ISPs to CPs for carrying their traffic. First, we show that the termination fee set by the integrated ISP decreases with the access price, whereas the termination fee of the non-integrated ISP can either increase or decrease with it. Second, we show that there exists a negative relationship (“waterbed effect”) between the access price and the total termination fee paid by the CPs. As a consequence, it may be socially optimal for the regulator to set the access price above cost when termination fees are left to the market.


Net neutrality Access regulation Internet access Two-sided markets 

JEL Classification

L13 L5 L96 



  1. Armstrong, M. (2006). Competition in two-sided markets. RAND Journal of Economics, 37, 668–691.CrossRefGoogle Scholar
  2. Armstrong, M., & Wright, J. (2009). Mobile call termination. Economic Journal, 119, 270–307.CrossRefGoogle Scholar
  3. Avenali, A., Matteucci, G., & Reverberi, P. (2010). Dynamic access pricing and investment in alternative infrastructures. International Journal of Industrial Organization, 28, 167–175.CrossRefGoogle Scholar
  4. Bourreau, M., Kourandi, F., & Valletti, T. (2015). Net neutrality with competing internet platforms. Journal of Industrial Economics, 63, 30–73.CrossRefGoogle Scholar
  5. Bourreau, M. & Lestage, R. (2017) Net neutrality and asymmetric platform competition. Working paper.Google Scholar
  6. Briglauer, W., Cambini, C., & Grajek, M. (2015a). Why is Europe lagging on next generation access networks? Bruegel Policy Contribution. Issue 2015–14, September 2015. Retrieved from
  7. Briglauer, W., Frübing, S., & Vogelsang, I. (2015b). The impact of alternative public policies on the deployment of new communications infrastructure—A survey. Review of Network Economics, 13, 227–270.Google Scholar
  8. Broos, S., & Gautier, A. (2017). The exclusion of competing one-way essential complements: Implications for net neutrality. International Journal of Industrial Organization, 52, 358–392.CrossRefGoogle Scholar
  9. Calzada, J., & Tselekounis, M. (2018). Net neutrality in a hyperlinked Internet economy. International Journal of Industrial Organization, 59, 190–221.CrossRefGoogle Scholar
  10. Choi, J. P., Jeon, D.-S., & Kim, B.-C. (2015). Net neutrality, business models, and internet interconnection. American Economic Journal: Microeconomics, 7, 104–141.Google Scholar
  11. Choi, J. P., & Kim, B.-C. (2010). Net neutrality and investment incentives. RAND Journal of Economics, 41, 446–471.CrossRefGoogle Scholar
  12. D’Annunzio, A., & Russo, A. (2015). Net neutrality and internet fragmentation: The role of online advertising. International Journal of Industrial Organization, 43, 30–47.CrossRefGoogle Scholar
  13. DeGraba, P. (2003). A bottleneck input supplier’s opportunity cost of competing downstream. Journal of Regulatory Economics, 23, 287–297.CrossRefGoogle Scholar
  14. Economides, N., & Hermalin, B. E. (2012). The economics of network neutrality. RAND Journal of Economics, 43, 602–629.CrossRefGoogle Scholar
  15. Economides, N., & Tåg, J. (2012). Network neutrality on the Internet: A two-sided market analysis. Information Economics and Policy, 24, 91–104.CrossRefGoogle Scholar
  16. Gans, J. S. (2015). Weak versus strong net neutrality. Journal of Regulatory Economics, 47, 183–200.CrossRefGoogle Scholar
  17. Gayle, P., & Weisman, D. (2007). Are input prices irrelevant for make-or-buy decisions? Journal of Regulatory Economics, 32, 195–207.CrossRefGoogle Scholar
  18. Greenstein, S., Peitz, M., & Valletti, T. (2016). Net neutrality: A fast lane to understanding the tradeoffs. Journal of Economic Perspectives, 30, 127–149.CrossRefGoogle Scholar
  19. Jullien, B., & Sand-Zantman, W. (2018). Internet regulation, two-sided pricing, and sponsored data. International Journal of Industrial Organization, 58, 31–62.CrossRefGoogle Scholar
  20. Kourandi, F., Krämer, J., & Valletti, T. (2015). Net neutrality, exclusivity contracts and internet fragmentation. Information Systems Research, 26, 320–338.CrossRefGoogle Scholar
  21. Krämer, J., & Wiewiorra, L. (2012). Network neutrality and congestion sensitive content providers: Implications for content variety, broadband investment and regulation. Information Systems Research, 23, 1303–1321.CrossRefGoogle Scholar
  22. Krämer, J., Wiewiorra, L., & Weinhardt, C. (2013). Net neutrality: A progress report. Telecommunications Policy, 37, 794–813.CrossRefGoogle Scholar
  23. Laont, J.-J., Rey, P., & Tirole, J. (1998). Network competition: I. Overview and nondiscriminatory pricing. RAND Journal of Economics, 29, 1–37.CrossRefGoogle Scholar
  24. Mandy, D. M. (2009). Pricing inputs to induce ecient make-or-buy decisions. Journal of Regulatory Economics, 36, 29–43.CrossRefGoogle Scholar
  25. Peitz, M., & Schuett, F. (2016). Net neutrality and inflation of traffic. International Journal of Industrial Organization, 46, 16–62.CrossRefGoogle Scholar
  26. Reggiani, C., & Valletti, T. (2016). Net neutrality and innovation at the core and at the edge. International Journal of Industrial Organization, 45, 16–27.CrossRefGoogle Scholar
  27. Rochet, J.-C., & Tirole, J. (2002). Cooperation among competitors: Some economics of payment card associations. RAND Journal of Economics, 33, 549–570.CrossRefGoogle Scholar
  28. Sappington, D. E. M. (2005). On the irrelevance of input prices for make-or-buy decisions. American Economic Review, 95, 1631–1638.CrossRefGoogle Scholar
  29. Vogelsang, I. (2003). Price regulation of access to telecommunications networks. Journal of Economic Literature, 41, 830–862.CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media, LLC, part of Springer Nature 2019

Authors and Affiliations

  1. 1.Department of Economics and Social SciencesTelecom ParisTechParisFrance
  2. 2.School of Management and EngineeringCentral University of Finance and EconomicsBeijingPeople’s Republic of China

Personalised recommendations