Complementary innovation and network neutrality

One of the central goals of network neutrality policies is to safeguard Internet-based innovation. Historically, entrepreneurial activities in applications and services were a main driver of innovation and stimulated complementary advances in networking. With the increasing heterogeneity of services, this virtuous cycle of complementary innovation is changing. Building on evolutionary theories of innovation and the notion of general-purpose technologies, we examine how these changes affect Internet-based innovation. In this framework, we analyze the effects of network neutrality policies on innovation dynamics. Our analysis reveals that network neutrality regulations as currently implemented may impede and delay innovation experiments that require a differentiated quality of service arrangements. To overcome such undesirable effects on innovation, we propose an approach that allows safeguarding important goals of network neutrality while permitting a differentiation of network services in support of next-generation innovation.