Subsidization Competition: Vitalizing the Neutral Internet

Unlike telephone operators, which pay termination fees to reach the users of another network, Internet Content Providers (CPs) do not pay the Internet Service Providers (ISPs) of users they reach. While the consequent cross subsidization to CPs has nurtured content innovations at the edge of the Internet, it reduces the investment incentives for the access ISPs to expand capacity. As potential charges for terminating CPs' traffic are criticized under the net neutrality debate, we propose to allow CPs to voluntarily subsidize the usagebased fees induced by their content traffic for end-users. We model the regulated subsidization competition among CPs under a neutral network and show how deregulation of subsidization could increase an access ISP's utilization and revenue, strengthening its investment incentives. Although the competition might harm certain CPs, we find that the main cause comes from high access prices rather than the existence of subsidization. Our results suggest that subsidization competition will increase the competitiveness and welfare of the Internet content market; however, regulators might need to regulate access prices if the access ISP market is not competitive enough. We envision that subsidization competition could become a viable model for the future Internet

Paid Peering, Settlement-Free Peering, or Both?

With the rapid growth of congestion-sensitive and data-intensive applications, traditional settlement-free peering agreements with best-effort delivery often do not meet the QoS requirements of content providers (CPs). Meanwhile, Internet access providers (IAPs) feel that revenues from end-users are not sufficient to recoup the upgrade costs of network infrastructures. Consequently, some IAPs have begun to offer CPs a new type of peering agreement, called paid peering, under which they provide CPs with better data delivery quality for a fee. In this paper, we model a network platform where an IAP makes decisions on the peering types offered to CPs and the prices charged to CPs and end-users. We study the optimal peering schemes for the IAP, i.e., to offer CPs both the paid and settlement-free peering to choose from or only one of them, as the objective is profit or welfare maximization. Our results show that 1) the IAP should always offer the paid and settlement-free peering under the profit-optimal and welfare-optimal schemes, respectively, 2) whether to simultaneously offer the other peering type is largely driven by the type of data traffic, e.g., text or video, and 3) regulators might want to encourage the IAP to allocate more network capacity to the settlement-free peering for increasing user welfare

On the Economics of Cloud Markets

Cloud computing is a paradigm that has the potential to transform and revolutionalize the next generation IT industry by making software available to end-users as a service. A cloud, also commonly known as a cloud network, typically comprises of hardware (network of servers) and a collection of softwares that is made available to end-users in a pay-as-you-go manner. Multiple public cloud providers (ex., Amazon) co-existing in a cloud computing market provide similar services (software as a service) to its clients, both in terms of the nature of an application, as well as in quality of service (QoS) provision. The decision of whether a cloud hosts (or finds it profitable to host) a service in the long-term would depend jointly on the price it sets, the QoS guarantees it provides to its customers, and the satisfaction of the advertised guarantees. In this paper, we devise and analyze three inter-organizational economic models relevant to cloud networks. We formulate our problems as non co-operative price and QoS games between multiple cloud providers existing in a cloud market. We prove that a unique pure strategy Nash equilibrium (NE) exists in two of the three models. Our analysis paves the path for each cloud provider to 1) know what prices and QoS level to set for end-users of a given service type, such that the provider could exist in the cloud market, and 2) practically and dynamically provision appropriate capacity for satisfying advertised QoS guarantees.Comment: 7 pages, 2 figure

Pricing and Revenue Sharing between ISPs under Content Sharing

Department of Electrical EngineeringAs sponsored data with subsidized access cost gains popularity in industry, it is essential to understand its impact on the Internet service market. We investigate the interplay among Internet Service Providers (ISPs), Content Provider (CP) and End User (EU), where each player is selfish and wants to maximize its own profit. In particular, we consider multi-ISP scenarios, in which the network connectivity between the CP and the EU is jointly provided by multiple ISPs. We first model non-cooperative interaction between the players as a four-stage Stackelberg game, and derive the optimal behaviors of each player in equilibrium. Taking into account the transit price at intermediate ISP, we provide in-depth understanding on the sponsoring strategies of CP. We then study the effect of cooperation between the ISPs to the pricing structure and the traffic demand, and analyze their implications to the players. We further build our revenue sharing model based on Shapley value mechanism, and show that the collaboration of the ISPs can improve their total payoff with a higher social welfare.ope

Network Neutrality and the Evolution of the Internet

In order to create incentives for Internet traffic providers not to discriminate with respect to certain applications on the basis of network capacity requirements, the concept of market driven network neutrality is introduced. Its basic characteristics are that all applications are bearing the opportunity costs of the required traffic capacities. An economic framework for market driven network neutrality in broadband Internet is provided, consisting of congestion pricing and quality of service differentiation. However, network neutrality regulation with its reference point of the traditional TCP would result in regulatory micromanagement of traffic network management. --Broadband Internet,network neutrality,quality of service differentiation,congestion pricing,interclass externality pricing,interconnection agreements

Modeling Tiered Pricing in the Internet Transit Market

ISPs are increasingly selling "tiered" contracts, which offer Internet connectivity to wholesale customers in bundles, at rates based on the cost of the links that the traffic in the bundle is traversing. Although providers have already begun to implement and deploy tiered pricing contracts, little is known about how such pricing affects ISPs and their customers. While contracts that sell connectivity on finer granularities improve market efficiency, they are also more costly for ISPs to implement and more difficult for customers to understand. In this work we present two contributions: (1) we develop a novel way of mapping traffic and topology data to a demand and cost model; and (2) we fit this model on three large real-world networks: an European transit ISP, a content distribution network, and an academic research network, and run counterfactuals to evaluate the effects of different pricing strategies on both the ISP profit and the consumer surplus. We highlight three core findings. First, ISPs gain most of the profits with only three or four pricing tiers and likely have little incentive to increase granularity of pricing even further. Second, we show that consumer surplus follows closely, if not precisely, the increases in ISP profit with more pricing tiers. Finally, the common ISP practice of structuring tiered contracts according to the cost of carrying the traffic flows (e.g., offering a discount for traffic that is local) can be suboptimal and that dividing contracts based on both traffic demand and the cost of carrying it into only three or four tiers yields near-optimal profit for the ISP