İktisat Lisansüstü Programı

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  • Öge
    Net neutrality in oligopolistic models of content provision and internet service provision markets
    (Graduate School, 2022-09-13) Erkul, Turgut ; Ecer, Sencer ; 412152005 ; Economy
    Importance of telecommunications in all societies and all industries is growing tremendously. From entertainment to even the most basic needs such as ordering potable water right at our doorsteps, we rely on the telecommunication networks to provide us the means. Behind the scenes there is a complex mesh of advanced technology with an evolving market interaction of Content Providers (CPs) and Internet Service Providers (ISPs) racing to profit from the end-users (EUs). National Telecommunications Regulatory Authorities (NTRA) in each country regulate the market to maximize the total welfare. Net Neutrality (NN) is the mechanism that is implemented and safeguarded by the NTRAs that protects against discrimination of data. As a principle, NN advocates that all data has been created equal and shall not be throttled, discarded, de-prioritized or charged differently than any other data. Furthermore, NN prevents ISPs asking for termination fees from CPs to give them access to the EUs. Content Providers (CPs) seem to be generally pro-NN and ISPs seem to be against NN, likely because of the relative inelasticity of end-user demand for ISPs compared to CPs, which is reflected in the joint demand structure as I model in this dissertation. Latest academic articles have focused on the successive monopoly or successive oligopoly models in vertically related markets to explain the dynamics of the CP, ISP and end-user interaction. In these models, upstream is the CP (e.g., Netflix, BluTV), downstream is the ISP (e.g., Comcast, TTNet). In early models, CPs and ISPs are assumed to be perfect complements. Therefore, the termination fee that the CP pays to the ISP becomes irrelevant, and hence does not impact the prices to the end-user or the total welfare. This result is not consistent with what we observe in the industry, like the case between South Korea Broadband and Netflix (Bae et al., 2021). Indeed, there is mounting pressure from ISPs to allow these payments, which means these fees are not irrelevant. My conclusion is that the perfect complementarity assumption is inappropriate to explain the industry. In my model, I introduce imperfect complementarity, which releases the constraint that the quantity of CP demanded, and the quantity ISP demanded to be equal, and I show that introducing a non-zero termination fee may indeed increase total welfare. Therefore, we recommend NTRAs to consider termination fee as a leverage to maximize the social welfare within each country. Furthermore, I show that the need for net neutrality depends on the level of complementarity and own price effects of the ISP and the CP relative to each other.
  • Öge
    Network neutrality in the internet as a two sided market constituted by congestion sensitive end users and content providers
    (Graduate School, 2023-03-01) Kaplanlıoğlu, Özgür ; Güloğlu, Bülent ; Ecer, Sencer ; 412152004 ; Economics
    In this paper, I envision a two-sided market mediated by a monopolistic internet service provider, ISP. The ISP provides end-users internet access and carries content providers' (CPs') data packages on its network. I compare the case where network neutrality is strictly practiced with the case where the ISP can "throttle" the traffic of certain content providers. In the model, for simplicity, a single CP is exposed to throttling, while the other CPs, which are part of a continuum, are not. I then study the implications of the violation of network neutrality on total data consumption, congestion, and capacity investment. Under network neutrality, the decision variables of the ISP are end-user price and network bandwidth. I found that, in equilibrium, because of the monopolistic nature of the market is greater than the price under competitive equilibrium, and is lower than its socially optimum value. Thus, under neutrality, the ISP undersupplies both the capacity and the data. Under discrimination, the ISP is allowed to charge an access fee on unit bandwidth to one of the content providers (the discriminated CP). To reflect a scenario of great practical value, I choose the discriminated CP from one of the big OTTs such as YouTube, Instagram, Facebook, Netflix, etc. In this setting, to access the network, the discriminated CP needs to buy bandwidth from the ISP. However, the bandwidth bought by the discriminated CP is not for exclusive usage of the discriminated CP. It rather acts as an upper bandwidth limit for the discriminated CP. Under discrimination, the decision variables of the ISP are the end-user price, the network bandwidth, and the bandwidth price. I found that when allowed the ISP always prefers to deviate from network neutrality by charging a positive price for bandwidth. Also, the ISP sets just enough to keep the discriminated CP in the market. Comparing the equilibrium outcomes, I show that under discrimination, the ISP charges a lower price to end-users. However, the discrimination also leads to less network bandwidth installed. Both the lower end-user price and the lower network bandwidth contribute to the congestion. Thus, under discrimination, the congestion is higher than under neutrality. Considering its adverse effects on the network bandwidth and congestion, although the end-user price is lower under discrimination, I recommend that the network neutrality principle should not be abolished.