ISP pricing and Platform pricing interaction under net neutrality

Jose Ramon Vidal; Luis Guijarro; Vicent Pla

arxiv: 2401.14791 · v1 · submitted 2024-01-26 · 💰 econ.TH · cs.NI

ISP pricing and Platform pricing interaction under net neutrality

Luis Guijarro , Vicent Pla , Jose Ramon Vidal This is my paper

Pith reviewed 2026-05-24 04:49 UTC · model grok-4.3

classification 💰 econ.TH cs.NI

keywords net neutralitytwo-sided pricingISP pricingplatform pricingcontent providerssurplus extractionmarket interaction

0 comments

The pith

Platforms extract surplus from content providers under ISP net neutrality but would not if ISPs could two-sided price.

A machine-rendered reading of the paper's core claim, the machinery that carries it, and where it could break.

The paper models a market with users, content providers, serving ISPs, and an intermediary platform that matches them and sets two-sided prices. It compares the current regime where ISPs must remain neutral and cannot charge both sides against a counterfactual where ISPs are allowed two-sided pricing. The central result is that platforms extract surplus from content providers when ISPs are constrained by net neutrality, but this extraction disappears once ISPs can also price on both sides. The interaction matters because platform and ISP pricing decisions are interdependent under different regulatory constraints.

Core claim

In a scenario where users and content providers reach each other both directly through serving ISPs and through an intermediary platform that applies two-sided pricing, enforcing net neutrality on the ISPs permits the platforms to extract surplus from the content providers, whereas the platforms lose this ability in the counterfactual where the ISPs are permitted to apply two-sided prices.

What carries the argument

The interaction between platform two-sided pricing and the ISP's regulatory ability or inability to apply two-sided prices.

If this is right

Platforms extract surplus from content providers only when ISPs are bound by net neutrality.
Allowing ISPs to set two-sided prices removes the platform's ability to extract that surplus.
The regulatory treatment of ISP pricing directly alters the distribution of surplus between platforms and content providers.

Where Pith is reading between the lines

These are editorial extensions of the paper, not claims the author makes directly.

Regulators evaluating net neutrality may need to account for existing platform pricing power.
Comparative studies across jurisdictions with different ISP pricing rules could test the predicted surplus shift.
Models with competing platforms or multiple ISPs would clarify whether the extraction result holds under greater competition.

Load-bearing premise

The market structure with users, content providers, serving ISPs, and an intermediary platform is representative enough that the pricing interaction alone determines the surplus extraction outcome.

What would settle it

Empirical observation of whether content providers pay systematically higher fees to platforms in markets where ISPs are strictly neutral compared with markets where ISPs are allowed to charge both users and content providers.

Figures

Figures reproduced from arXiv: 2401.14791 by Jose Ramon Vidal, Luis Guijarro, Vicent Pla.

**Figure 1.** Figure 1: Scenario This work has been conducted during a research stay at the Weizenbaum Institut, Berlin, Germany, in July 2023, hosted by the Research Group Digital Economy, Internet, Ecosystems and Internet Policy thanks to Dr. Stocker’s invitation. Financial support is acknowledged from Grant PID2021-123168NB-I00, funded by MCIN/AEI, Spain/10.13039/ 501100011033 and the European Union A way of making Europe/ERD… view at source ↗

**Figure 2.** Figure 2: Platform and ISPs payment flow model. 2.3 Platform’s decisions The platform charges a fee β to each subscriber and a fee α to each joined CP, so that it gets a revenue equal to Πp = αnc + βnu. (5) We neglect the variable costs incurred by the platform, so that the platform will set the two-sided price {α, β} in order to maximize Πp. If the platform is absent, then fees β and α are set to zero. 2.4 ISP’s de… view at source ↗

**Figure 3.** Figure 3: Access ISP’s profit as a function of δ [PITH_FULL_IMAGE:figures/full_fig_p008_3.png] view at source ↗

**Figure 4.** Figure 4: Platform’s profit as a function of δ [PITH_FULL_IMAGE:figures/full_fig_p008_4.png] view at source ↗

**Figure 5.** Figure 5: Number of subscribers as a function of δ 7 [PITH_FULL_IMAGE:figures/full_fig_p008_5.png] view at source ↗

**Figure 6.** Figure 6: Number of joined CPs as a function of δ [PITH_FULL_IMAGE:figures/full_fig_p009_6.png] view at source ↗

**Figure 7.** Figure 7: Consumers’ surplus as a function of δ [PITH_FULL_IMAGE:figures/full_fig_p009_7.png] view at source ↗

**Figure 8.** Figure 8: CPs surplus as a function of δ 8 [PITH_FULL_IMAGE:figures/full_fig_p009_8.png] view at source ↗

**Figure 9.** Figure 9: Social welfare as a function of δ 9 [PITH_FULL_IMAGE:figures/full_fig_p010_9.png] view at source ↗

**Figure 10.** Figure 10: Access ISP’s profit as a function of γ [PITH_FULL_IMAGE:figures/full_fig_p011_10.png] view at source ↗

**Figure 11.** Figure 11: Platform’s profit as a function of γ 5 Conclusions and limitations We conclude preliminary that: • the presence of a platform does not modify the incentives of the CPs when the ISP is not subject to net neutrality regulations. The social welfare is unaffected by the platform presence. • but, when the ISP is subject to such regulation, the presence of a platform makes the CPs worse off, and the social welf… view at source ↗

**Figure 12.** Figure 12: Number of subscribers as a function of γ [PITH_FULL_IMAGE:figures/full_fig_p012_12.png] view at source ↗

**Figure 13.** Figure 13: Number of joined CPs as a function of γ These conclusions reveal the fact that the platforms are extracting surplus from the CPs under the current net neutrality regime for the ISP, and that the platforms would not be able to do so under the counter-factual situation where the ISPs could apply two-sided prices. We acknowledge the following limitations of the conducted research: • The decision of modeling … view at source ↗

**Figure 14.** Figure 14: Consumers’ surplus as a function of γ [PITH_FULL_IMAGE:figures/full_fig_p013_14.png] view at source ↗

**Figure 15.** Figure 15: CPs surplus as a function of γ game model. • Finally, we have assumed that the CP outside option does not allow reaching the users, which is very restrictive under the current multiplicity of interconnection alternatives offered by big CPs, Tier-1 ISPs and Cloud Providers (Stocker et al., 2017). The inclusion of these richer set of alternatives is under consideration for further study. References Bellefla… view at source ↗

**Figure 16.** Figure 16: Social welfare as a function of γ Stocker, V. and W. Lehr (2022). Regulatory policy for broadband: A response to the ETNO report’s proposal for intervention in europe’s internet ecosystem. Available at SSRN 4263096. Stocker, V., G. Smaragdakis, W. Lehr, and S. Bauer (2017). The growing complexity of content delivery networks: Challenges and implications for the internet ecosystem. Telecommunications Polic… view at source ↗

read the original abstract

We analyze the effects of enforcing vs. exempting access ISP from net neutrality regulations when platforms are present and operate two-sided pricing in their business models. This study is conducted in a scenario where users and Content Providers (CPs) have access to the internet by means of their serving ISPs and to a platform that intermediates and matches users and CPs, among other service offerings. Our hypothesis is that platform two-sided pricing interacts in a relevant manner with the access ISP, which may be allowed (an hypothetical non-neutrality scenario) or not (the current neutrality regulation status) to apply two-sided pricing on its service business model. We preliminarily conclude that the platforms are extracting surplus from the CPs under the current net neutrality regime for the ISP, and that the platforms would not be able to do so under the counter-factual situation where the ISPs could apply two-sided prices.

Editorial analysis

A structured set of objections, weighed in public.

Desk editor's note, referee report, simulated authors' rebuttal, and a circularity audit. Tearing a paper down is the easy half of reading it; the pith above is the substance, this is the friction.

Desk Editor's Note private letter to a colleague

The model shows platforms extracting CP surplus only under ISP net neutrality, but the result rests on a stylized four-party pricing game.

read the letter

The main takeaway is that platforms can pull surplus from content providers when ISPs are locked into one-sided pricing, but that extraction goes away once ISPs can also charge both sides. The paper sets up an explicit game with users, CPs, serving ISPs, and an intermediary platform, then compares the two regulatory regimes on the ISP side. That direct interaction between the two pricing layers is the piece that looks new relative to earlier work that treated them more separately. The derivation of the comparative static is straightforward inside the model and the directional claim follows from the equilibrium conditions they lay out. The market structure is a reasonable modeling choice for isolating the policy counterfactual, and the abstract frames the conclusion as preliminary rather than definitive. The main soft spot is that the result is sensitive to how the platform intermediates matches and to the assumed pricing powers on each side. If users or CPs have more outside options or if there is competition among platforms, the extraction effect could shrink or reverse. No obvious internal contradiction appears in the setup, but the full paper will need to show the equilibrium existence and any parameter robustness to make the claim stick. This is the sort of targeted model that belongs in a network economics or regulation journal. Readers already working on net neutrality extensions or two-sided platform interactions with access providers will get the most out of it. I would send it to referees. The question is policy-relevant and the four-party framing gives a clean way to think about the interaction, even if the assumptions stay stylized.

Referee Report

2 major / 0 minor

Summary. The paper analyzes the interaction between access ISP pricing (under or exempt from net neutrality) and platform two-sided pricing in a four-party market consisting of users, content providers (CPs), serving ISPs, and an intermediary platform that matches users and CPs. It hypothesizes that this interaction is material and preliminarily concludes that platforms extract surplus from CPs under the current net-neutrality regime (one-sided ISP pricing) but would be unable to do so if ISPs could apply two-sided prices.

Significance. If the comparative-static result holds in a fully specified model, the finding would bear on net-neutrality policy in platform-mediated markets by suggesting that allowing ISP two-sided pricing could limit platform rent extraction from CPs. The manuscript, however, supplies no model, equilibrium conditions, or robustness checks, so the claim cannot yet be evaluated.

major comments (2)

[Abstract] Abstract (and entire manuscript as provided): no model setup, demand or cost functions, equilibrium definition, or derivation of the surplus-extraction result is given. Without these elements the central comparative-static claim cannot be verified or falsified.
[Abstract] Abstract: the market structure (users, CPs, serving ISPs, intermediary platform) is asserted to be representative, yet no justification, parameter restrictions, or sensitivity analysis is supplied to support treating this structure as load-bearing for the policy conclusion.

Simulated Author's Rebuttal

2 responses · 0 unresolved

We thank the referee for these comments on our preliminary hypothesis. The current version is an extended abstract outlining the intended analysis without a formal model, and we agree this prevents verification of the claims. We will develop a full model in revision.

read point-by-point responses

Referee: [Abstract] Abstract (and entire manuscript as provided): no model setup, demand or cost functions, equilibrium definition, or derivation of the surplus-extraction result is given. Without these elements the central comparative-static claim cannot be verified or falsified.

Authors: We agree the submitted manuscript supplies only the hypothesis and preliminary conclusion without a formal model, demand functions, equilibrium conditions, or derivations. This is a genuine limitation of the current draft. In the revised version we will include a complete model setup with demand and cost functions, equilibrium definition, derivation of the surplus-extraction result, and robustness checks to allow verification of the comparative static. revision: yes
Referee: [Abstract] Abstract: the market structure (users, CPs, serving ISPs, intermediary platform) is asserted to be representative, yet no justification, parameter restrictions, or sensitivity analysis is supplied to support treating this structure as load-bearing for the policy conclusion.

Authors: The four-party structure is chosen to reflect common features of platform-mediated markets, but we acknowledge that no justification, parameter restrictions, or sensitivity analysis is provided. In the revision we will add explicit discussion of why this structure is representative for the policy question, including relevant parameter restrictions and sensitivity considerations. revision: yes

Circularity Check

0 steps flagged

No significant circularity identified

full rationale

The paper presents a theoretical four-party pricing game (users, CPs, serving ISPs, intermediary platform) whose central comparative-static result—that platform two-sided pricing extracts CP surplus only when ISPs are constrained to one-sided pricing—is obtained directly from the equilibrium conditions under the model's stated assumptions and market structure. No equation reduces to its inputs by construction, no parameter is fitted and then relabeled as a prediction, and no uniqueness theorem or ansatz is imported via self-citation. The derivation is self-contained within the game-theoretic setup; the representativeness of the structure is an explicit modeling choice rather than a hidden circular step.

Axiom & Free-Parameter Ledger

0 free parameters · 0 axioms · 0 invented entities

Only abstract available; no model details, parameters, or assumptions listed.

pith-pipeline@v0.9.0 · 5677 in / 975 out tokens · 23546 ms · 2026-05-24T04:49:50.912803+00:00 · methodology

discussion (0)

Reference graph

Works this paper leans on

6 extracted references · 6 canonical work pages

[1]

Belleflamme, P. and M. Peitz (2021). The Economics of Platforms . Cambridge University Press

work page 2021
[2]

Economides, N. and J. T g (2012). Network neutrality on the internet: A two-sided market analysis. Information Economics and Policy\/ 24\/ (2), 91--104

work page 2012
[3]

Maill \'e , P. and B. Tuffin (2022). From Net Neutrality to ICT Neutrality . Springer

work page 2022
[4]

Rochet, J.-C. and J. Tirole (2006). Two-sided markets: a progress report. The RAND journal of economics\/ 37\/ (3), 645--667

work page 2006
[5]

Stocker, V. and W. Lehr (2022). Regulatory policy for broadband: A response to the ETNO report’s proposal for intervention in europe’s internet ecosystem. Available at SSRN 4263096\/

work page 2022
[6]

Smaragdakis, W

Stocker, V., G. Smaragdakis, W. Lehr, and S. Bauer (2017). The growing complexity of content delivery networks: Challenges and implications for the internet ecosystem. Telecommunications Policy\/ 41\/ (10), 1003--1016

work page 2017

[1] [1]

Belleflamme, P. and M. Peitz (2021). The Economics of Platforms . Cambridge University Press

work page 2021

[2] [2]

Economides, N. and J. T g (2012). Network neutrality on the internet: A two-sided market analysis. Information Economics and Policy\/ 24\/ (2), 91--104

work page 2012

[3] [3]

Maill \'e , P. and B. Tuffin (2022). From Net Neutrality to ICT Neutrality . Springer

work page 2022

[4] [4]

Rochet, J.-C. and J. Tirole (2006). Two-sided markets: a progress report. The RAND journal of economics\/ 37\/ (3), 645--667

work page 2006

[5] [5]

Stocker, V. and W. Lehr (2022). Regulatory policy for broadband: A response to the ETNO report’s proposal for intervention in europe’s internet ecosystem. Available at SSRN 4263096\/

work page 2022

[6] [6]

Smaragdakis, W

Stocker, V., G. Smaragdakis, W. Lehr, and S. Bauer (2017). The growing complexity of content delivery networks: Challenges and implications for the internet ecosystem. Telecommunications Policy\/ 41\/ (10), 1003--1016

work page 2017