Neutrality between a Vertically Integrated Cable Provider and an Over-the-Top Video Provider

We are concerned with whether a vertically integrated broadband and content provider can unreasonably advantage itself over competing content providers, either by selling quality-of-service (QoS) to content providers at unreasonably high prices, or by refusing to provide access to QoS to competing content. We address this question by modeling the competition between one such vertically integrated provider and one over-the-top (OTT) content provider. The broadband provider decides whether to deploy QoS, and if so it also determines the QoS price if sold to either the OTT content provider or directly to users. We analytically determine when the broadband provider will sell QoS and when the OTT content provider or users will purchase QoS. We characterize the optimal QoS and video service prices. The Internet service provider (ISP)'s market share increases with the difference in the value of the two video services and decreases with the difference in the corresponding costs. Numerical results illustrate the effect of QoS price on content price, the variation of prices and profit with QoS price, and the variation of prices and market shares with the benefit of QoS. The ISP may sell QoS to users at a lower price than when QoS is sold to the OTT provider.