Zero-rating and network effects

Research output: Contribution to journalArticle

Abstract

We consider internet service providers’ incentives to zero-rate, i.e. to not count the usage of certain services towards data allowances, in the absence of payments from content providers. We show that zero-rating is adopted if and only if it strongly increases subscriptions. For this it is necessary that participation (as opposed to usage) network effects are strong enough and if zero-rating offers raise expectations about other subscribers’ usage. Zero-rating then also maximizes total welfare.

Original languageEnglish
Article number108813
JournalEconomics Letters
Volume186
DOIs
Publication statusPublished - 1 Jan 2020

Fingerprint

Rating
Network effects
ISP/Internet service provider
Incentives
Participation
Payment
Subscription

Keywords

  • Net neutrality
  • Network effects
  • Zero-rating

Cite this

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title = "Zero-rating and network effects",
abstract = "We consider internet service providers’ incentives to zero-rate, i.e. to not count the usage of certain services towards data allowances, in the absence of payments from content providers. We show that zero-rating is adopted if and only if it strongly increases subscriptions. For this it is necessary that participation (as opposed to usage) network effects are strong enough and if zero-rating offers raise expectations about other subscribers’ usage. Zero-rating then also maximizes total welfare.",
keywords = "Net neutrality, Network effects, Zero-rating",
author = "Steffen Hoernig and Francisco Monteiro",
note = "Funding agencies: FCT-Funda{\cc}{\~a}o Ci{\^e}ncia e Tecnologia (UID/ECO/00124/2013, UID/ECO/00124/2019 and Social Sciences DataLab, LISBOA-01-0145-FEDER-022209), POR Lisboa, Portugal (LISBOA-01-0145-FEDER-007722, LISBOA-01-0145-FEDER-022209) and POR Norte, Portugal (LISBOA-01-0145-FEDER-022209).",
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Zero-rating and network effects. / Hoernig, Steffen; Monteiro, Francisco.

In: Economics Letters, Vol. 186, 108813, 01.01.2020.

Research output: Contribution to journalArticle

TY - JOUR

T1 - Zero-rating and network effects

AU - Hoernig, Steffen

AU - Monteiro, Francisco

N1 - Funding agencies: FCT-Fundação Ciência e Tecnologia (UID/ECO/00124/2013, UID/ECO/00124/2019 and Social Sciences DataLab, LISBOA-01-0145-FEDER-022209), POR Lisboa, Portugal (LISBOA-01-0145-FEDER-007722, LISBOA-01-0145-FEDER-022209) and POR Norte, Portugal (LISBOA-01-0145-FEDER-022209).

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N2 - We consider internet service providers’ incentives to zero-rate, i.e. to not count the usage of certain services towards data allowances, in the absence of payments from content providers. We show that zero-rating is adopted if and only if it strongly increases subscriptions. For this it is necessary that participation (as opposed to usage) network effects are strong enough and if zero-rating offers raise expectations about other subscribers’ usage. Zero-rating then also maximizes total welfare.

AB - We consider internet service providers’ incentives to zero-rate, i.e. to not count the usage of certain services towards data allowances, in the absence of payments from content providers. We show that zero-rating is adopted if and only if it strongly increases subscriptions. For this it is necessary that participation (as opposed to usage) network effects are strong enough and if zero-rating offers raise expectations about other subscribers’ usage. Zero-rating then also maximizes total welfare.

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KW - Network effects

KW - Zero-rating

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