Broadband ISPs are part of a “two-sided” market,...
Broadband ISPs are part of a “two-sided” market, and the FCC’s net neutrality rules hurt the Internet’s value, said Justin Hurwitz, a member of the Free State Foundation Board of Academic Advisors, in a research note Monday (http://bit.ly/19R7aZk). In a…
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two-sided market, there are two distinct groups of consumers for the same good, and the number of consumers in one group affects the demand of the consumers in another group. End-user customers and content providers make ISPs a two-sided market, Hurwitz said, and that’s important because the intermediary in most such markets gets to set different prices for each side to maximize the value of the market. “The Open Internet rules, by preventing Verizon from charging firms like Google and Netflix for access to its network, prevent this market from behaving like a two-sided market,” Hurwitz said. “The economic literature suggests that the Open Internet rules can have a negative effect on the value created by the Internet, and that allowing broadband ISPs to charge content providers can benefit consumers and increase infrastructure investment."