There is an ongoing debate on whether over-the-top service (OTT) providers should financially compensate telecommunication service providers (TSPs). The core economic question is whether OTTs or content providers contribute to the costs incurred by a telecom network operator when delivering content to consumers. It is argued that imposing a fee on OTT would violate the net neutrality principle. The most basic definition of net neutrality includes the prohibition of payments from content providers to network service providers/TSPs. Arguably, once a payment component is introduced, the network provider can pick winners, eroding the very democratic nature on which the internet is premised. The cost-sharing proponents will surely hit this particular aspect of the net neutrality holy cow. However, I argue that when this question is seen from the lens of multi-sided markets, there is little support for the simplistic claims made by net neutrality evangelists as they overlook the trade-offs involved and the welfare implications of the same. Read more[…]
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