Differential Pricing of the Internet

The purpose of this study is to explore the provision of differentiated services of content and application by ISP, ICP, and ASP, and the optimal differential pricing strategies for the differentiated services. Theoretically, this study considers the ability to charge differently for different goods and different consumers for providers as the heterogeneity of prices. The providers may use different access charge policies of Internet usage, content, and application to fulfill the differential pricing of network services, using self-selecting optional two-part tariff with different fixed fee and different marginal prices of quantity or quality, or non-linear pricing with different fixed deposit services, and the third-degree price discrimination.

As long as the cost of providing differential pricing scheme is low enough, comparing a single tariff, a menu with several optional two-part tariffs or nonlinear pricing which gains more profit for providers and larger consumer\'s surplus for users. Moreover, the increment of total surplus from enhancing the price differentiation implies that the differential pricing of Internet services increases the welfare of the network economy.