Network effects, economic efficiency, and usage-based pricing for internet access

Abstract

This paper attempts to shed some light on the issue of net neutrality by examining the extent to which Internet usage is efficiently allocated under current conditions. I discuss the unique features of Internet usage which make it a good that markets will tend to provide at an inefficient level. I then discuss alternative pricing regimes that will move the market for Internet usage to efficiency. I conclude with a discussion of the current economic research on the topic.