Zero-rating and network effects

Hoernig, Steffen; Monteiro, Francisco

http://hdl.handle.net/10362/92736

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Autores

Hoernig, Steffen

Monteiro, Francisco

Resumo(s)

We consider internet service providers’ incentives to zero-rate, i.e. to not count the usage of certain services towards data allowances, in the absence of payments from content providers. We show that zero-rating is adopted if and only if it strongly increases subscriptions. For this it is necessary that participation (as opposed to usage) network effects are strong enough and if zero-rating offers raise expectations about other subscribers’ usage. Zero-rating then also maximizes total welfare.