Thursday, May 14, 2015

Ban Zero Rating? Why Not Ban Value?

Opposed to zero rating of application usage? For consistency’s sake, why not also oppose all platforms --and they are quite common--bringing together consumers and producers?

Why not oppose all network effects? Zero rating is an example of a “platform” and also an example of a “two-sided market.”

Why not oppose all ad-supported media and applications? All ad-supported applications and media have suppliers subsidizing consumer usage.

In quite a large number of cases, network effect (the network gains more value as the number of users or nodes grows) also is a characteristic of platforms and two-sided markets. Zero rating is directly related to network effects.

Shopping malls and eBay are platforms, bringing together groups of users and suppliers. Credit cards are such platforms, linking consumers and merchants. Google, Facebook and Yelp are platforms. Zero rating is a platform.

Newspapers and magazines, TV and radio networks, all are based on two-sided market, platform economics and suppliers defraying consumption costs for consumers.  

Health maintenance organizations and computer operating systems also serve what economists call two-sided markets or two-sided networks. Few of those networks ever are completely inclusive: they serve the members of the network (both on consumer and health provider sides).

Two-sided markets are quite common, in other words, and quite helpful.

Newspapers, for instance, join subscribers and advertisers; HMOs link patients to a web of health care providers, and health providers to patients. Operating systems connect computer users and application developers.

Zero rating is an example of a two-sided market. Banning zero rating is harmful for potential participants--consumers and suppliers.

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