Neutrality between a Vertically Integrated Cable Provider and an Over-the-Top Video Provider
We are concerned with whether a vertically integrated broadband and content provider can unreasonably advantage itself over competing content providers, either by selling quality-of-service (QoS) to content providers at unreasonably high prices, or by refusing to provide access to QoS to competing content. We address this question by modeling the competition between one such vertically integrated provider and one over-the-top (OTT) content provider. The broadband provider decides whether to deploy QoS, and if so it also determines the QoS price if sold to either the OTT content provider or directly to users. We analytically determine when the broadband provider will sell QoS and when the OTT content provider or users will purchase QoS. We characterize the optimal QoS and video service prices. The Internet service provider (ISP)'s market share increases with the difference in the value of the two video services and decreases with the difference in the corresponding costs. Numerical results illustrate the effect of QoS price on content price, the variation of prices and profit with QoS price, and the variation of prices and market shares with the benefit of QoS. The ISP may sell QoS to users at a lower price than when QoS is sold to the OTT provider.
- D. Wu, Y. Hou, W. Zhu, Y. Zhang, and J. Peha, "Streaming video over the internet: Approaches and directions," IEEE Trans. Circuits Syst. Video Technol., vol. 11, no. 3, pp. 282-300, Mar. 2001.
- A. Meddeb, "Internet QoS: Pieces of the puzzle," IEEE Commun. Mag., vol. 48, no. 1, pp. 86-94, Jan. 2010.
- V. Kocsis and P. Bijl, "Network neutrality and the nature of competition between network operators," International Economics and Economic Policy, vol. 4, no. 2, pp. 159-184, Aug. 2007.
- D. Weisman and R. Kulick. (2010, Sept.). Price discrimination, two-sided markets, and net neutrality regulation. Tul. J. Tech. & Intell. Prop. [Online]. vol. 13, Available: http://ssrn.com/abstract=1582972
- S. Baldry, M. Steingrover, andM. Hessler, "The rise of OTT players: What is the appropriate regulatory response?," in Proc. ITS Europe, June 2014.
- P. Nooren, A. Leurdijk, and N. Eijk, "Net neutrality and the value chain for video," Info, vol. 14, no. 6, pp. 45-58, 2012.
- S. Jordan, "Implications of Internet architecture on net neutrality," ACM Trans. Internet Technol., vol. 9, no. 2, May 2009.
- D. Grunwald, "The Internet ecosystem: The potential for discrimination," Federal Commun. Law J., vol. 63, no. 2, pp. 411-443, 2011.
- D.Waterman and S. Choi, "Non-discrimination rules for ISPs and vertical integration: Lessons from cable television," Telecommun. Policy, vol. 35, no. 11, pp. 970-983, Dec. 2011.
- H. Hotelling, "Stability in competition," The Economic J., vol. 39, no. 153, pp. 41-57, 1929.
- S. Kim, "Economic Approach for Network Management," Game Theory Appl. Netw. Design, IGI Global, May 2014.
- W. Dai and S. Jordan, "ISP Service Tier Design," IEEE/ACMTrans. Netw., vol. 24, no. 3, pp. 1434-1447, June 2016.
- L. Ratliff, S. Burden, and S. Sastry, "Characterization and computation of local Nash equilibria in continuous games," in Proc. 51st Annual Allerton Conference on Communication, Control, and Computing, Oct. 2013.
- FCC. (2015, Apr.). FCC 16th Video Competition Report. [Online]. Available: https://apps.fcc.gov/edocs_public/attachmatch/FCC-15-41A1.doc
- Ycharts. (2015). Directv Profit Margin. [Online]. Available: http://ycharts.com/companies/DTV/profit_margin
- Netflix Profit Margin, Available: http://ycharts.com/companies/NFLX/profit_margin, accessed 2015
- T. Stenovec. (2014, Apr.). Yes, Netflix And Hulu Are Starting To Kill Cable. The Huffington Post. [Online]. Available: http://www.huffingtonpost.com/2014/04/17/netflix-cable_n_5168725.html