Network neutrality and quality of service: a two-sided market analysis

This paper examines the welfare implications of a network management regime which substitutes a network neutrality regime. Under the network management regime, we allow internet service providers (ISPs) to differentiate their network connections through some quality of service (QoS) tools. We find that ISPs' profit increases through creation of a special lane for paying content/application providers (CAPs), both in monopoly and in duopoly models. Similarly, end-users (Es) gain more surplus under the network management regime. However, non-paying CAPs are excluded from the market as degradation level in their lane increases.