Capacity Expansion of Neutral ISPs via Content Peering Charges

Abstract

Many internet service providers (ISPs) operate under network neutrality regulations which forbid smart data pricing schemes such as those that provide differential QoS or differential pricing, leading to lower profitability. Increasing bandwidth-hungry content is making the consumers demand improved ISP infrastructure. With the risk of poor consumer experience squarely on the ISP, the ISPs are forced to invest in their infrastructure with little scope for monetisation via innovative user pricing. And they are asking the content providers (CPs) to pick up some of the tab for ISP capacity expansion. In this paper we explore the possibility of network neutral capacity expansion sponsored by voluntary peering charges from CPs.We consider the scenario where CPs peer with an ISP and take the lead in paying peering charges with the caveat that this has to be used for capacity expansion. Since ISP capacity expansion can benefit all the CPs, and possibly even the ISP, selfish CPs will determine their charges strategically. We consider three models for the CPs to interact in determining the charge---a cooperative model, a non-cooperative model, and a bargaining model. Our analysis reveals a rather surprising result. We show that the bargaining model leads to a higher investment in the ISP infrastructure than even the cooperative model. This leads us to recommend policies that promote transparency in the interconnection agreements between CPs and ISPs.