Game Theory and Net Neutrality

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A researcher at the University of Florida and his colleagues have used game theory, which is important to evolution and economics, to show that net neutrality encourages internet service providers (ISPs), companies that offer dial-up, cable modem, DSL, or similar access to the internet, to increase their bandwidth. The ISP industry is currently pressing congress to pass legislation ending net neutrality.

Under the current, net neutrality law, ISPs are required to partition their bandwidth based on the size of a site and how much their customers access a site. However, if net neutrality is ended then ISPs will be allowed to partition their bandwidth based not on their customers needs but on which websites can pay the most money. If net neutrality is ended, then ISPs will be able to extort money from content providers like Yahoo, Google, or even small fry like us, by offering to increase (or threatening to decrease) the speed at which the customers of said ISP can access the content provider’s sites.

According to an article in ScienceDaily, the researchers showed that customers lose out if net neutrality is ended, for the simple fact that ending net neutrality encourages ISPs to decrease the bandwidth available to their customers.

More important, the researchers found that the incentive for broadband service providers to expand and upgrade their service actually declines if net neutrality ends. Improving the infrastructure reduces the need for online content providers to pay for preferential treatment, Bandyopadhyay said.

“The whole purpose of charging for preferential treatment to content providers is that one content provider gains some edge over the other,” he said. “But when the capacity is expanded, this advantage becomes negligible.”

He gave the analogy of the expansion of a two-lane highway where drivers willing to pay a toll to subsidize road improvements are rewarded with exclusive use of a faster lane.

“If the road is upgraded from two to four lanes, with one express lane, these drivers might say ‘Three lanes are good enough for me. I don’t want to have to pay a toll any longer,’” he said. “So the desire to pay a toll when the road is expanded gets lesser.”

The experience of other countries also suggests that better service – up to three times faster – results when there is greater competition, Cheng said.

“In Japan and Korea, where there is net neutrality and much greater competition among broadband providers than in the United States, there are also higher broadband speeds,” he said.”

Hat Tip: Cortunix.

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Was watching the BBC 2 programs on Sunday night - The Trap - The series explores the concept and definition of freedom, specifically how a simplistic model of human beings as self-seeking, almost robotic, creatures led to today's idea of freedom - using G Read More

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Here we have game theory showing the desirability of government regulation. It would be great to see other studies of this sort, and scientifically overthrow the prevailing mythology of “free markets”, which are theoretical constructs that can’t exist in the real world since they require, among other things, total absence of deception (all agents must have full access to all information required to make market decisions) and zero startup costs (no bars to market entry).

“In Japan and Korea, where there is net neutrality and much greater competition among broadband providers than in the United States, there are also higher broadband speeds,” he said.”

Uh, can he say post hoc ergo propter hoc? the United States is the only industrialized state without an explicit national policy for promoting broadband. “Until recently, the United States led the world in Internet development.…Things changed when the Bush administration took over in 2001 and set new priorities for the country: tax cuts, missile defense, and, months later, the war on terrorism.”

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This page contains a single entry by Reed A. Cartwright published on March 12, 2007 11:37 AM.

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