Abstract
We adopt a two-sided market model to represent the interaction of internet service providers (ISP), internet users and content providers to study the optimal pricing strategy for the ISP. We allow the ISP to vary all four components of the price, that is, subscription and usage price to the internet user, and subscription and usage price to the content provider. We offer a potential business advantage to the ISP describing how the total charges can be allocated between the internet user and the content provider and how the price charged to one side can be allocated between the subscription and usage parts. Under a realistic assumption, we show that a profit maximising ISP would prefer to provide access subsidy to both the internet user and the content provider and derive profit from the usage volume.
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