Research on hot internet issue wins major award for business school professor

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Professor Tommaso Valletti from Imperial College Business School has won an international prize for a study on the issue of net neutrality.
Net neutrality is the principle that internet service providers and governments regulating the internet should treat all online traffic equally and not discriminate against certain users from accessing different parts of the internet by restricting content or charging fees.

Professor Valletti’s paper – first published last year – has been named as one of the winners in the International Journal of Industrial Organization Best Paper Award 2017.

The report, entitled ‘Net neutrality and innovation at the core and at the edge’ contrasts net neutrality, whereby all traffic on the internet is treated equally, to prioritisation where content providers can guarantee a faster delivery of content by paying a fee.

The paper proposes a model for analysing the benefits of each approach and concludes that net neutrality protects innovation at the edge of the internet from small providers, such as start-ups, while prioritization increases investment and welfare – but only if it stimulates innovation from the large content providers.

The issue has recently become a hot topic due to plans by the President Trump administration to deregulate broadband internet service companies and to jettison former President Barack Obama administration’s net neutrality rules, which were intended to safeguard competition online.

In his paper, Professor Valletti argues that the internet seems to be working well to encourage innovation and expansion. However, the development of more content-rich applications will lead to a growth in demand which will test the limits of existing networks.

The main dispute concerns which of two policy options would generate greater benefits: the protection of innovation and competition in internet content, or the encouragement of greater investment in new capacity.

In an effort to advance the debate, this research seeks to provide a formal framework which incorporates the arguments of either side – and provides a possible solution, to get providers to pay but give full access rights for all users.

Professor Valletti said: “I’m delighted to receive this recognition for my work. Net neutrality is a big global concern, especially following the recent changes to the US’s net neutrality rules, thanks to the Trump administration.

“With companies such as Netflix and YouTube consuming increasingly large amounts of internet bandwidth, you could argue that net neutrality limits them from providing a faster, more efficient service to users. However, if these big content providers want to charge users for their services, this could unfairly discriminate against those who can’t afford it as free provision has long been one of the hallmarks of the internet.

“The internet has the power to connect people and enhance innovation, but this can only happen if smaller companies are allowed to flourish, so the web continues to be a place for innovation and investment.”

In his role as Chief Economist for Competition at the EU Commission, Professor Valletti had a role in the recent abolishment of mobile data roaming charges, due to his extensive research in this area.

Net neutrality and the innovation at the core and at the edge was co-authored by Carlo Reggiani of the University of Manchester.