Side payments as barriers to entry in non-neutral networks

In the network neutrality debate, content providers fight against side payments imposed by Internet Service Providers, arguing that it could slow down innovation. But at the same time some big providers actually pay those fees while still officially in favor of neutrality. To better understand this strategical behavior, this paper proposes a simple model providing some insight on whether or not paying side payments for an incumbent provider is a way to create barriers to entry for competitors. It also investigates the economic consequences on all actors: incumbent and new entrant content providers, users, and the Internet Service Provider. We then describe how the side payment can be determined as a Nash bargaining solution.