Revenue Sharing among ISPs
in Two-Sided Markets
Yuan Wu, Hongseok Kim, Prashanth H. Hande,
Muan Chiang, Danny H.K. Tsang
Published at IEEE Infocom 2011 Mini-conference
Chulhyun Park
[email protected]
2011.8.3.
Agenda
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ISP Pricing basic
Network Model
Revenue sharing case
Non-cooperative case
Profit division by NBS
Summary
ISP Pricing
• Example for data request and response
Data request
ISP 1 will charge
the user A
because it deliver
the data request
ISP 2 can charge ISP 1 for the
delivery of the data request packet:
ISP 2
ISP 1
User A
ISP 3
For this delivery, ISP 3 will
charge the ISP 2
User B
ISP Pricing
• Example for data request and response
Data transmission
ISP 2 can charge ISP 3 for the
delivery of the traffic
ISP 1 will charge ISP 2
as it deliver the data to
user A
ISP 2
ISP 1
User A
ISP 3 will charge User B as
it delivers its traffic (data)
to the Internet (and user A
in an indirect way)
ISP 3
User B
ISP Pricing
• ISP relationship
– Customer-Provider
• Customer will pay to the Provider for the
delivery of traffic to the Internet
– Peering
• If amount of inter-ISP traffic between two ISPs
are roughly same, the ISPs can make a contract
indicates “free-transit” between ISPs
Network Model
• Two ISPs connects Content Provider (CP)
and End User (EU)
• ISP 2 is dominant in this model
• heu / geu: usage-price / flat price for end user
• hcp / gcp : usage-price / flat price for content provider
• π : transit cost determined by dominant player
Rate decision
• CP (also EU) will request resource (i.e.
service/traffic rate) to its ISPs to maximize
its utility such that
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hcp / gcp : usage-price / flat price for content provider
σcp : utility level (e.g. popularity of the content)
y : service rate provisioning
ucp(y) : utility function
– Price elasticity will be
– EU’s maximizing problem is almost same
Rate decision
• In this paper, the utility function is
• Then the provisioning rate function is
• Where elasticity can be expressed as
• heu / geu: usage-price / flat price for end user
• hcp / gcp : usage-price / flat price for content provider
• σcp : utility level (e.g. popularity of the content)
Profit for each ISP
• Profit for each ISP
– For ISP 1
– For ISP 2
ISP 2 is
dominant
– Where
• Interests of two ISPs are conflicting, so
without any coordination, two ISPs do not
cooperate
Revenue Sharing
• If each ISP share its revenue..
• The profit function will be
– For ISP 1
– For ISP 2
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hcp / gcp : usage-price / flat price for content provider
σcp : utility level (e.g. popularity of the content)
x : service rate provisioning
θ / γ : revenue share portion for ISP 1 and ISP 2
Shared profit
from ISP 2
Revenue Sharing
• So the social profit
will be
• Theorem 1 : when sharing factor is given
by
, two ISPs will coordinate
each other as maximizing social profit Rs,
as each ISP will maximize its own profit
Revenue Sharing
• Transit price π
– which is smaller than marginal cost of ISP 2,
and ISP 2 will compensate the loss with ISP
1’s shared income
Pricing Strategy
• Social Profit Maximization problem (SPM)
– Constraint 6, 7 for non-negative net utility
– Constraint 8 for effective (requested) traffic
rate
– The problem is non-convex problem
Pricing Strategy
• Equivalent problem of Social Profit
Maximization (SPM-E)
– The problem is convex
– With optimal rate allocation x* in the SPM-E,
we can get optimal pricing for SPM
Non-cooperative Model
• No collusion between ISPs
Charging
π
hcp , gcp
Content
Provider
ISP 1
ISP 2
heu , geu
End
User
• heu / geu: usage-price / flat price for end user
• hcp / gcp : usage-price / flat price for content provider
• π : transit price (decided by ISP 2)
Non-cooperative Model
• 1) ISP 2 sets transit price π
• 2) ISP 1 determines its traffic rate x by
solving following problem:
– Optimal rate will be
• 3) ISP 2 determines its traffic rate x and
adjusts transit price by solving following:
Implications
• Theorem 3 : as
, the profit
ratio
is increasing with σeu and is
decreasing with σcp
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is social profit at the noncooperative eq.
Profit ratio decreases ( = non-cooperative waste increases)
as σcp increases ( = ISP 1 cannot satisfy CP’s requirement)
Implications
• Theorem 4 : as
, profit
ratio G increases as α increases
Profit ratio increases as α increases
as CP/EU become more price-inelastic
Summary
• Cooperative collusion between two ISPs in
two-sided market can increase social profit by
appropriate revenue-sharing contract
• In non-cooperative case, social profit is smaller
than cooperative case but can be
compensated by other variables like price
elasticity and end-user price