Net neutrality and high-speed broadband networks: evidence from OECD countries

Abstract

AbstractNetwork neutrality regulations are intended to preserve the Internet as a non-discriminatory, public network and an open platform for innovation. Whereas the U.S. reversed its regulations in 2017, returning to a less strict regime, the EU has maintained its course and recently revised implementation guidelines for its strict and rather interventionist net neutrality regulations. To this day, there exist only a few empirical investigations on the impact of network neutrality regulations, based on rather broad measures of investment activities for individual countries. Our paper provides the first estimation results on the causal impact of net neutrality regulations on new high-speed (fiber-optic cable-based) infrastructure investment by Internet service providers. We use a comprehensive and most recent OECD panel data set for 32 countries for the period from 2000 to 2021 covering the entire high-speed broadband network deployment period. We employ various panel estimation techniques, including instrumental variables estimation. Our empirical analysis is based on theoretical underpinnings derived from a simplified model in a two-sided market framework. We find empirical evidence that net neutrality regulations exert a significant and strong negative impact on fiber investments. Our results suggest that, while we cannot provide evidence on the overall welfare consequences of net neutrality, imposing strict net neutrality regulations clearly slow down the deployment of new fiber-based broadband connections.