Jullien, Bruno and Bouvard, Matthieu (2022) Fair cost sharing: big tech vs telcos. TSE Working Paper, n. 22-1376, Toulouse

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Abstract

We study a cost-sharing mechanism where a content provider contributes to covering
the costs incurred by a network operator when delivering content to consumers. The costshare
not only boosts the content provider's incentives to moderate trac but also aects
the price composition for consumers buying access and content. We show the overall
eect on consumer welfare depends on the content provider's ability to monetize users.
When that ability is high, introducing a cost-share can lead to lower overall prices and
higher consumer welfare. We study the robustness of this result to long-term investments
in cost reduction by the operator and to heterogeneity in consumers' taste for content. In
extensions with multiple contents and multiple operators, contractual externalities arise
that suggest a role for regulation.