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A fresh look at zero-rating

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  • Krämer, Jan
  • Peitz, Martin
Abstract
We provide an economic assessment of zero-rating offers in the context of mobile internet access services and draw six lessons: (1) Zero-rating can have several different characteristics that crucially affect their economic and welfare assessment. Thus, regulatory interventions must be based on a careful case-by-case analysis. (2) In the context of zero-rating offers, it is often crucial to evaluate the extent to which users are able to activate and deactivate a (throttled) zero-rated tariff option. If activation/deactivation is easy and instantaneous, a sound economic theory of harm for consumers will in many cases be hard to establish. (3) Similarly, if access to zero-rated partner programs is non-discriminatory and entails low barriers to entry, a sound theory of harm for content providers will usually not be given. (4) Zero-rating can be beneficial for consumers and (legal) content providers alike by contributing to a reduction of illegal content. Combined with throttling it can mitigate congestion problems. However, by requiring all content belonging to the same content category to be treated equally with respect to throttling, independent of whether a content provider opted for zero-rating or not, the existing regulation creates a negative externality on those content providers that do not wish to be zero-rated for some reason. (5) Particular attention should be paid to the impact of throttled zero-rating tariffs on the competition between mobile network operators (MNOs) and MVNOs. The latter may not be able to compete on equal footing with MNOs, because they benefit less from the traffic management aspects of zero-rating. (6) Competition among (infrastructure-based) ISPs provides a safeguard against severe rent extraction and, thus, an abuse of throttling and zero-rating as an exploitative device. Therefore, regulators should carefully account for the competitive environment and the existing tariff portfolio and options before deciding to intervene. Competition policy, rather than ex-ante regulation, may be more suitable for this task.

Suggested Citation

  • Krämer, Jan & Peitz, Martin, 2018. "A fresh look at zero-rating," Telecommunications Policy, Elsevier, vol. 42(7), pages 501-513.
    • Handle: RePEc:eee:telpol:v:42:y:2018:i:7:p:501-513
    DOI: 10.1016/j.telpol.2018.06.005
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    1. Krämer, Jan & Peitz, Martin, 2018. "A fresh look at zero-rating," Telecommunications Policy, Elsevier, vol. 42(7), pages 501-513.
    2. Jeitschko, Thomas D. & Kim, Soo Jin & Yankelevich, Aleksandr, 2021. "Zero-Rating and Vertical Content Foreclosure," Information Economics and Policy, Elsevier, vol. 55(C).
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    10. Jullien, Bruno & Sand-Zantman, Wilfried, 2018. "Internet regulation, two-sided pricing, and sponsored data," International Journal of Industrial Organization, Elsevier, vol. 58(C), pages 31-62.
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    Cited by:

    1. Comeig, Irene & Klaser, Klaudijo & Pinar, Lucía D., 2022. "The paradox of (Inter)net neutrality: An experiment on ex-ante antitrust regulation✰," Technological Forecasting and Social Change, Elsevier, vol. 175(C).
    2. Saruta, Fuyuki, 2021. "Effects of Vertical Integration on Internet Service Providers' Zero-rating Choice," MPRA Paper 110288, University Library of Munich, Germany.
    3. Gautier, Axel & Somogyi, Robert, 2020. "Prioritization vs zero-rating: Discrimination on the internet," International Journal of Industrial Organization, Elsevier, vol. 73(C).
    4. Inceoglu, Firat & Liu, Xingyi, 2019. "Multiproduct price discrimination with quantity limits: An application to zero-rating," Economics Letters, Elsevier, vol. 180(C), pages 41-45.
    5. Lorenzon, Emmanuel, 2022. "Zero-rating, content quality, and network capacity," Information Economics and Policy, Elsevier, vol. 58(C).
    6. Saruta, Fuyuki, 2022. "Effects of vertical integration on internet service providers’ zero-rating choice," Information Economics and Policy, Elsevier, vol. 61(C).
    7. Krämer, Jan & Peitz, Martin, 2018. "A fresh look at zero-rating," Telecommunications Policy, Elsevier, vol. 42(7), pages 501-513.
    8. Briglauer, Wolfgang & Stocker, Volker & Stockhammer, Paul, 2019. "Ist Netzneutralität tatsächlich gut? Eine Neubewertung vor dem Hintergrund der Regulierung in den USA und in der EU sowie aktueller Forschungsergebnisse," Policy Notes 38, EcoAustria – Institute for Economic Research.
    9. Jaunaux, Laure & Lebourges, Marc, 2018. "Zero rating and end-users' freedom of choice: An economic analysis," 29th European Regional ITS Conference, Trento 2018 184947, International Telecommunications Society (ITS).
    10. Jeitschko, Thomas D. & Kim, Soo Jin & Yankelevich, Aleksandr, 2021. "Zero-Rating and Vertical Content Foreclosure," Information Economics and Policy, Elsevier, vol. 55(C).
    11. Bruno Jullien & Matthieu Bouvard, 2022. "Fair cost sharing: big tech vs telcos," Working Papers hal-03832908, HAL.
    12. Siddhartha Menon, 2021. "An Institutional Analysis of TMP Regulation in India," Review of Policy Research, Policy Studies Organization, vol. 38(3), pages 300-325, May.
    13. Vogelsang Ingo, 2018. "Net Neutrality Regulation: Much Ado about Nothing?," Review of Network Economics, De Gruyter, vol. 17(3), pages 225-243, September.
    14. Brouwer, Dennis, 2020. "A non-discrimination principle for rankings in app stores," Internet Policy Review: Journal on Internet Regulation, Alexander von Humboldt Institute for Internet and Society (HIIG), Berlin, vol. 9(4), pages 1-27.
    15. Emmanuel LORENZON, 2020. "Zero Rating, Content Quality and Network Capacity," Bordeaux Economics Working Papers 2020-21, Bordeaux School of Economics (BSE).
    16. Hoernig, Steffen & Monteiro, Francisco, 2020. "Zero-rating and network effects," Economics Letters, Elsevier, vol. 186(C).
    17. Steffen Hoernig; Francisco Monteiro, 2018. "Zero-rating, network effects, and capacity investments," Nova SBE Working Paper Series wp627, Universidade Nova de Lisboa, Nova School of Business and Economics.
    18. Jullien, Bruno & Bouvard, Matthieu, 2022. "Fair cost sharing: big tech vs telcos," TSE Working Papers 22-1376, Toulouse School of Economics (TSE).

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    More about this item

    Keywords

    Zero-rating; Net neutrality; Throttling; Traffic management; Mobile communications;
    All these keywords.

    JEL classification:

    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software

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