The public option: a non-regulatory alternative to network neutrality

Network neutrality and the role of regulation on the Internet have been heavily debated in recent times. Amongst the various definitions of network neutrality, we focus on the one which prohibits paid prioritization of content. We develop a model of the Internet ecosystem in terms of three primary players: consumers, ISPs and content providers. We analyze this issue from the point of view of the consumer, and target the desired system state that maximizes consumer surplus. By analyzing the various structures of an ISP market, we obtain different conclusions on the desirability of regulation. We also introduce the notion of a Public Option ISP, an ISP that carries traffic in a network neutral manner. We find (i) in a monopolistic scenario, network neutral regulations might benefit consumers; however, the introduction of a Public Option ISP is even better, as it aligns the interests of the monopolistic ISP with the consumer surplus and (ii) in an oligopolistic scenario, the presence of a Public Option ISP is again preferable to network neutral regulations, although the presence of competing non-neutral ISPs provides the most desirable situation for the consumers. Lastly, the ISP survivability is an orthogonal direction towards the debate. Nevertheless, our findings reveal that even ISPs can survive, network neutrality might still not be needed.