The Effect of Zero-Rating on Mobile Broadband Demand: An Empirical Approach and Potential Implications
Zero-rating, a popular practice in which certain services or applications are exempted from data charges, has motivated a debate within the broader topic of net neutrality. Advocates claim that it can be a driver of broadband adoption in less favored regions and population segments, and opponents argue that it entails socially undesirable outcomes. A growing body of literature supports these diverging positions, but empirical evidence and critical assessments are scarce. Therefore, this paper presents a regression model to provide empirical proof of the effect of zero-rating on the demanded quantity of mobile broadband. Results demonstrate that consumers are better off with zero-rating in terms of estimated consumer surplus. Because this evidence addresses only one side of an issue that should be analyzed in a multisided market framework, further theoretical implications are discussed. A key conclusion is that zero-rating can be associated with socially desirable outcomes, and, even though zero-rating also entails the potential for adverse consequences, the results advise caution regarding regulatory tools that might be too stringent.