LAW & ECONOMICS: INTERNET ACCESS - TWO-SIDED MARKET - NET NEUTRALITY - CROSS-SUBSIDY - NETWORK ACCESS COSTS - CONTENT PROVIDERS - ECONOMIC ANALYSIS - EFFICIENCY - INNOVATION - PREMIUM SERVICES - 2009 AMENDMENTS TO ELECTRONIC COMMUNICATIONS DIRECTIVES - QUALITY SERVICE - EUROPEAN FRAMEWORK - ABUSE OF DOMINANCE - ANTICOMPETITIVE VERTICAL AGREEMENT - NETWORK MONOPOLY - DISCRIMINATION - IAP

Net neutrality in Europe: An economic and legal analysis

An examination of Internet access as a two-sided market reveals among other things that net neutrality creates a cross-subsidy from retail Internet users, who pay all the costs of the access network, toward content providers. This cross-subsidy may maximize social welfare because it lowers the cost of market entry for content providers. Economic analysis suggests that it should be maintained, but that to support productive efficiency and innovation at the access network, Internet access providers (IAPs) should also be able to charge for premium services in addition to "best efforts" Internet access. The 2009 amendments to the electronic communications directives provide that IAPs must disclose to their users the kinds of traffic management techniques that they use. NRAs may in some cases impose minimum quality of service standards for basic Internet access. Under the European framework, robust retail competition is deemed to be the best guarantee against upstream discrimination by IAPs. Under European competition law, a net neutrality violation could be analyzed as an abuse of dominance, or as an anticompetitive vertical agreement. While an IAP has certain similarities to a telephone operator, it is not possible to apply the “terminating network monopoly” theory used for termination of voice traffic. Dominance may thus be difficult to find. If discrimination by an IAP results from a vertical agreement, a case by case analysis is necessary to determine whether the competitive harm created by the agreement is outweighed by consumer benefits.

See also Jean-Paul Tran Thiet and Orion Berg, « The BEREC, composed of EU national regulatory agencies, considers that it would be premature to adopt new legislation in regard to net neutrality (open Internet) », Concurrences, N° 4-2010, n° 32730 I. Introduction 1. Net neutrality refers to the potential problem of an Internet access provider (IAP) discriminating against certain kinds of applications and content, either by blocking them altogether or by degrading the quality of transmission. It can also refer to an IAP providing higher quality of service (QoS) to content providers, usually video, based on paying a premium for such service. Why would an IAP block or degrade certain kinds of content or applications? It may be to protect the network against undue congestion or attacks; it

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Nicolas Curien, Winston Maxwell, Net neutrality in Europe: An economic and legal analysis, December 2010, Concurrences Review N° 4-2010, Art. N° 32730, pp. 44-53

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