Jeitschko, Thomas D. Kim, Soo Jin Yankelevich, Aleksandr
Year of Publication:
DICE Discussion Paper 317
We study zero-rating, a practice whereby an Internet service provider (ISP) that limits retail data consumption exempts certain content from that limit. This practice is particularly controversial when an ISP zero-rates its own vertically integrated content, because the data limit and ensuing overage charges impose an additional cost on rival content. We find that zero-rating and vertical integration are complementary in improving social welfare, though potentially at the expense of lower profit to an unaffiliated content provider. Moreover, allowing content providers to pay for zero-rating via a sponsored data plan raises welfare by inducing the ISP to zero-rate more content.
Data Caps Sponsored Data Two-Sided Market Vertical Content Foreclosure Zero-Rating