Brief Recap of Part 1

Understanding Deep Packet Inspection

Understanding Broadband Services

Using DPI to Manage Internet Traffic

Outcome of the Net Neutrality Game — Take 2

Brief Recap of Part 1

In Playing the Net Neutrality Game, Part 1, I presented a discussion of net neutrality that focused on the common carrier aspect of the issue.  That is, proponents of net neutrality argue that the Internet, is an essential component of the nation’s communication system, and as such

Internet access providers should not discriminate with regard to what applications an individual can use, or the content an individual can upload, download, or interacted with over the network. Individuals acquiring services from Internet access providers should be able to use the applications and devices of their choice, and interact with the content of their choice anywhere on the Internet.

Opponents of net neutrality argue claim that since the Internet providers own the infrastructure that supports the Internet, they should be free to manage it as they see fit.

I then indicated that from an economic standpoint, the issue at the heart of the matter is the fact that the Internet “pipes” through which content moves have a limited capacity.  To the extent aggregate flows of content over the Internet (more than) fill the pipes, then how should the capacity be allocated among users? I argued that given the scarcity of capacity, an economically fair way of allocating capacity across users would be to switch from the current per-user based fee system, in which users are free to use as much capacity as they want for a set monthly price, to a fee-based access system, in which users are charged based on the amount of capacity they use.  I then examined the incentives faced by Internet Providers, content providers, and users to determine how Internet usage would differ under a usage-based fee system relative to that under the current user-based fee system.  I concluded that as compared with the current system, which employs per-user based Internet access fees, a system with usage-based Internet access fees would result in

• High intensity Internet users paying higher Internet usage fees and consuming less bandwidth overall
• Low intensity Internet users paying lower Internet usage fees, having more low Intensity users using the Internet, and having low intensity users consuming more bandwidth overall
• Content providers generating lower ad-based revenues
• Internet Providers generating greater revenues from the provision of Internet usage services.