Network neutrality and difference in efficiency among Internet application service providers: A meta-frontier analysis

As Internet applications evolve and require wider and more stable bandwidth, Internet service providers (ISPs) try to maximize their profit by controlling application service providers (ASPs); this has caused a network neutrality debate. This article categorizes ASPs into four groups by bandwidth-usage attributes and latency sensitivity. By estimating the efficiency of these groups, their efficiency differences are estimated, indicating evidence of discrimination of ISPs when network neutrality is not maintained. Meta-frontier analysis is used to compare efficiencies across companies using different production function technologies. Finally, a Tobit regression model is used to determine which variables explain the difference of efficiencies. The estimation result indicates that the discrimination of ISPs against ASPs is not significant enough to decrease the efficiency of any application group.

► We compare the efficiency differences of Internet application groups. ► We estimate the difference using meta-frontier methodology. ► We find evidence of discrimination of ISPs when network neutrality is not maintained. ► The distinction of ISP is not significant enough to decrease the efficiency of ASPs.