Competition for Quality of Services under Net Neutrality and Prioritization

Abstract This paper examines the effect of prioritization on competing CPs’ incentives to invest to improve their quality of service (QoS). We show that in the single-homing case, no CP makes a positive amount of investment under net neutrality because the effect of reducing delay is shared by both CPs, while the prioritized CP does not invest to improve QoS in the M/M/1 queuing model in which the effect is shared by the unprioritized CP and both CPs invest for QoS in the bandwidth subdivision model in which the effect is not shared. In the multi-homing case, however, CPs invest for QoS even under net neutrality, because CPs do not virtually compete against each other.