10.3.5 ISPs, Net Neutrality, and Media Content
To enjoy media content, users need an Internet connection. Thus, a user obtains her
consumption utility from jointly consuming both the content and the connectivity ser-
vice. If the user is not using public wi-fi, she typically will have a contract with an ISP.
This ISP offers her download and upload services at a contractually agreed-upon speed.
When content travels from the content provider to the consumer, the provider
accesses the Internet via its ISP. Content is then sent through the Internet to the con-
sumer’s ISP. Traditionally, the content provider makes payments to its ISP. The ISP then
ensures that content is delivered to the consumer’s ISP. The consumer pays her ISP for
the access product. There are no payments from the content provider to the consumer’s
ISP. In addition, all material is treated equally according to the best-effort principle.
Due to the explosion in data volume, a new issue is congestion, which leads to delays
at certain times or to the breakdown of some services. Internet media are part of the con-
gestion issue; according to
Sandvine (2014) , real-time entertainment, which includes
media, constitutes a large fraction of the traffic. For instance, on mobile networks in
Europe, YouTube contributes 20.62% and Facebook 11.04% to downstream traffic;
as reported in
Section 10.2.1, a large fraction of this traffic stems from news accessed
by users. The OECD predicts that video streaming and IP-based television will increase
traffic volumes (
OECD, 2014).
Congestion issues are particularly relevant with mobile access where capacities are
lower, but may also take place on landlines (DSL, cable). Some content providers have
opted for the possibility of bypassing the public Internet and the risk of delay at intercon-
nection points by operating content-delivery networks. Also, some ISPs offer media
products (e.g., TV) that are treated differently from other content. Furthermore, as part
of the net neutrality debate, there is discussion about whether a consumer’s ISP can also
charge on the content-provider side, thus introducing two-sided pricing. In addition,
ISPs may inspect the data that they are handling and decide—based on the characteristics
of the data in question—which type should receive priority treatment (deep packet
inspection). Furthermore, as a number of countries are currently considering, content
providers might self-select into different service classes, as ISPs offer both a slow and a
fast lane. Such tiering would be legal according to the European Commission’s proposal.
Content providers could pay for prioritized access (while the “slow” lane is typically con-
sidered to be free). It has become mostly a political question whether these more flexible
approaches should be allowed.
Proponents of strict net neutrality want to rule out such approaches, forcing ISPs to
obtain all their revenues on the consumer side and not allowing them to deviate from the
best-effort principle, which treats all traffic symmetrically. Critics of strict net neutrality
point out that a one-sided price structure in a two-sided market tends to lead to rents on
one side while reducing rents on the other. In particular, ruling out payments by content
468 Handbook of Media Economics