Economic Impact of Content Delivery Networks on the Net Neutrality Debate

This paper analyses the impact of the entry of a Content Delivery Network(CDN) on network neutrality and innovation, when the incumbent provider is a monopoly Internet Service Provider (ISP) in a two-sided platform market. We find that in the presence of heterogeneous consumers and consumer service providers (CSP), entry of a CDN leads to increased levels of innovation, measured by the number of content providers in the market. Additionally, consumer utility and number of consumers also increases, but price discrimination in the data transfer service becomes prominent - which leads to failure of net neutrality. These findings are in line with several recent trends in high bandwidth data services as well as the CDN marketplace.