ESMT White Paper

Assessment of a sustainable Internet model for the near future

ESMT White Paper No. WP-11-01
Hans W. Friederiszick, Jakub Kałużny, Simone Kohnz, Michał Grajek, Lars-Hendrik Röller (2011)
Subject(s): Economics, politics and business environment, Ethics and social responsibility
Keyword(s): Internet business models, net neutrality, impact assessment

The increasing demand for bandwidth due to data-intense applications, the convergence of various digital communication technologies as well as the increasing commercial importance of the Internet has given rise to one of the most important questions in the coming years: whether and how the Internet economic model needs to evolve and what role regulation should play in this process. Net neutrality regulation, if and when formally implemented in some shape or form, has the potential to reallocate resources among industry participants, affect optimal pricing strategies and ultimately impact investment and innovation incentives. Through these effects, the regulatory framework is going to affect which business models will be at all feasible, which are going to thrive, and which will become obsolete.
The report derives and analyzes some likely future business models with a view to sustainability in terms of ability to accommodate increasing traffic volumes and social welfare implications. Based on these assessments the regulatory implications are discussed for each business model.
The stylized business models each focus on a different aspect: the "Congestion-Based Model" stresses the possibility to tackle congestion problems through congestion-based pricing. The "Best Effort Plus" preserves the traditional best effort network but gives ISPs more leeway with innovative services. The "Quality Classes - Content Pays" stresses the observed need of different applications for various degrees of quality of service. The "Quality Classes - User Pays" model, however, puts the focus on consumer choice for higher quality levels.

Pages 132
Publication Nr. WP-11-01
ISSN 1866–4016 (Print)