The Effects of Non-Neutral Network Management Policies on the Price and Diffusion of Broadband in the Developing World

Increased global deployment of and access to the Internet are seen as vital to the advancement of developing economies. A 2014 report from the World Bank concludes the development of broadband has pervasive effects on the productivity of several essential sectors of a nation’s economy and increases a nation’s ability to attract foreign direct investment. Having affordable broadband prices are essential to increasing broadband access (Tajiri, 2009). Previous studies have looked at competition between broadband providers in Spain (Fageda et. al, 2014) and in the European Union (Calzada and Martinez-Santos, 2014) as determinants of price; however, research is lacking that analyzes how the network management policies of individual broadband providers affect Internet prices. Specifically, no previous research has looked at the effect bandwidth caps, or data caps, have on price. In this paper, cross-sectional data collected in 2013 surveying 1,590 broadband plans from 94 countries is used to analyze the effects of bandwidth caps on broadband prices. This study demonstrates that the use of bandwidth caps has a significant and differentially greater impact on broadband prices in developing countries. Specifically, equal decreases in the size of bandwidth caps are shown to have greater than twice the effect on decreasing broadband prices in developing countries than developed countries.