Emin KÖKSAL

Regulation and Competition in Telecommunications: The Case of Network Neutrality

2008

(Supervisor: A. Suut Doğruel)

ABSTRACT

Network neutrality has become a heated debate throughout growing prominence of broadband internet. Some authorities claim that the resolution of the debate may shape the next generation internet. In fact, the debate is highly technical, and requires more research to reach reliable conclusions. This thesis is designed to make some rigorous contributions to the debate through a sophisticated economic framework and a model.

Our research question during this thesis indicates how private incentives of network providers to deviate from network neutrality may create social costs and benefits. To answer this question we divide our study into four parts and each indicates individual chapters. The first part which is labeled as Chapter 2 constitutes an economic framework and a roadmap for the rest of our study. The third chapter introduces an economic model to investigate the incentives of network providers to deviate from neutrality. Then, the fourth chapter examines the welfare implications of network neutrality comparing with two types of deviation. Finally, the fifth chapter presents an experiment to test our model in different market conditions.

Overall conclusion of our research suggests allowing network providers to make non-price discrimination, particularly quality discrimination. And, such quality discrimination may be extended to some kinds of prioritization, providing caching, or quality of service (QoS) arrangements. On the other hand, despite welfare destructive effects of price discrimination, we cannot call for a definite neutrality regulation which prohibits price discrimination, since we could not find enough evidences for the incentive of deviation in monopoly market structure.