Profit Sharing Contracts Between Content and Service Providers for Enhanced Network Quality

Revenue sharing on the Internet: A case for going soft on neutrality regulations

Revenue sharing contracts between Content Providers (CPs) and Internet Service Providers (ISPs) can act as leverage for enhancing the infrastructure of the Internet. ISPs can be incentivised to make investments in network infrastructure that improve Quality of Service (QoS) for users if attractive contracts are negotiated between them and CPs. The idea here is that part of the revenue of CPs is shared with ISPs to invest in infrastructure improvement. We propose a model in which CPs (leaders) determine contracts, and an ISP (follower) reacts by strategically determining the infrastructure enhancement (effort) for each CP. Two cases are studied: (i) the ISP differentiates between the CPs and puts (potentially) a different level of efforts to improve the QoS of each CP, and (ii) the ISP does not differentiate between CPs and makes equal amount of effort for all the CPs. The last scenario can be viewed as neutral behavior by the ISP. Our analysis of optimal contracts shows that preference of CPs for the neutral and non-neutral regime depends on their monetizing power - CPs which can better monetize their demand tend to prefer non-neutral regime whereas the weaker CPs tend to prefer the neutral regime. Interestingly, ISP revenue, as well as social utility, are also found to be higher under the non-neutral regime. We then propose an intermediate regulatory regime that we call "soft-neutral", where efforts put by the ISP for all the CPs need not be equal same but the disparity is not wide. We show that the soft-neutral regime alleviates the loss in social utility in the neutral regime and the outcome further improves when CPs determine their contracts through bargaining.

The ongoing net neutrality debate has generated a lot of heated discussions on whether or not monetary interactions should be regulated between content and access providers. Among the several topics discussed, ‘differential pricing’ has recently received attention due to ‘zero-rating’ platforms proposed by some service providers. In the differential pricing scheme, Internet Service Providers (ISPs) can exempt data access charges for on content from certain CPs (zero-rated) while no exemption is on content from other CPs. This allows the possibility for Content Providers (CPs) to make ‘sponsorship’ agreements to zero-rate their content and attract more user traffic. In this article, we study the effect of differential pricing on various players in the Internet. We first consider a model with a monopolistic ISP and multiple CPs where users select CPs based on the quality of service (QoS) and data access charges. We show that in a differential pricing regime 1) it is possible for a CP to obtain higher utility than a CP offering better QoS through higher subsidy at user equilibrium 2) Overall QoS (mean delay) for end users can degrade under differential pricing schemes. In the oligopolistic market with multiple ISPs, ISPs tend to set equal access prices at equilibrium and similar conclusions are derived as in the monopolistic market.

The past few years have witnessed a huge acceleration in global Internet traffic. Users' demand for contents is also rising accordingly. Therefore, content providers (CPs) that provide contents for users get high revenue from the traffic growth. There are generally two ways for CPs to get revenue: (i) charge users for the contents they view or download; (ii) get revenue from advertisers. On the other hand, Internet service providers (ISPs) are investing in network infrastructure to provide better quality of service (QoS), but they do not benefit directly from the content traffic. One option for ISPs to compensate their investment cost is sharing CPs' revenue by side payment from CPs to ISPs. Then ISPs will be motivated to keep on investing in developing new network technology and enlarging the capacity to improve QoS. However, it is important to evaluate how each player is affected by this kind of side payment. Our previous work has studied this problem by assuming that CPs charged users for the contents they view or download, in this paper it is considered that CP does not directly charge end users, but charges advertisers for revenue. Stackelberg game is utilized to study the interactions among ISP, CP, end users and advertisers. A unique Nash equilibrium is established and numerical analysis has validated our theoretic results. It shows that side payment from CP to ISP impairs the CP's investment of contents, and ISP can benefit from charging CP, while CP's payoff is impaired.

As content delivered on the Internet becomes richer, the use of content delivery services in which users pay a fee for each content delivery to the content provider (CP) increases. For Internet service providers (ISPs), on the other hand, the increased investment cost required to maintain stable quality is a problem, and ISPs need to recover this cost from CPs because it is difficult to do so by increasing fees to users. However, CPs usually pay an access fee whose increase ratio diminishes as the volume of transmitted data increases, so the profit obtained by the ISPs is not sufficient to cover their investment cost. To address this problem, a content charge in which ISPs charge a fee for each content delivery to CPs would seem to be effective. However, it is anticipated that CPs will switch to another ISP if the original ISP introduces a content charge, so introducing a content charge may not always increase the revenue of ISPs. This paper investigates the feasibility of adding a content charge by ISPs and evaluates the effect such a charge would have by modeling the relationship between CPs and ISPs using a two-stage Stackelberg game.

This paper develops a game theoretic model based on a two-sided market framework to investigate the net neutrality debate. In particular, we consider investment incentives of Internet Service Providers (ISPs) under a neutral and non-neutral network regimes. In our model, two interconnected ISPs compete over quality and prices for heterogeneous content providers (CPs) and heterogeneous consumers. We consider two definitions of a non-neutral network: in the first, ISPs charge access fees to off-network CPs; in the second, ISPs offer priority lanes''. In the neutral regime, connecting to a single ISP allows a CP to communicate with all consumers and all CPs obtain the same quality of service. With a combination of theoretical and numerical results we find that under both definitions ISPs' quality-investment levels are driven by the trade-off they make between softening price competition on the consumer side and increasing revenues extracted from CPs. Specifically, in the non-neutral regime, because it is easier to extract surplus through appropriate CP pricing, ISPs' investment levels are larger. Because CP quality is enhanced by the quality of ISPs, larger investment levels imply that CPs' revenues increase. Similarly, consumer surplus increases as well. The main insight resulting from our model is that social welfare is larger in the non-neutral regime. Our results highlight important mechanisms related to ISPs' investments that play a key role in market outcomes, providing useful insights that enrich the net neutrality debate.

With the popularity of smart devices such as smartphones, tablets, contents that traditionally be viewed on a personal computer, can also be viewed on these smart devices. The demand for contents thus is increasing year by year, which makes the content providers (CPs) get high revenue from either users' subscription or advertisement. On the other hand, Internet service providers (ISPs), who keep investing in the network technology or capacity to support the huge traffic generated by contents, do not benefit directly from the content traffic. One choice for ISPs is to charge CPs to share the revenue from the huge content traffic. Then ISPs will have enough incentives to invest in network infrastructure to improve quality of services (QoS), which eventually benefit CPs and users. This paper presents a novel economic model called Stackelberg-Bertrand game to capture the interaction and competitions among ISPs, CPs and users when ISPs charge CPs. A generic user demand function is assumed to capture the sensitivity of demand to prices of ISPs and CPs. The numerical results show that the price elasticity of ISP and CP plays an important part on the payoff of the ISP and CP.

Sponsored data: A game-theoretic model with consumer multihoming behaviour

We consider the relationship of Internet service providers (ISP) and content service providers (CP) in the Internet ecosystem. Currently, the position of ISPs is challenged by the emergence of powerful content service providers, especially with the spreading of bandwidth-demanding video services. The further investment in the network capacity may be hindered by prevailing business models that largely exclude the ISPs from sharing in the major cash flows resulting from content provision. We develop modeling tools for evaluation of business models of ISPs and present results of an analysis of two models with the potential for the generation of additional cash flows for ISP: paid content peering and service differentiation. Firstly, we show that under certain conditions on the cost structure and the level of demand elasticity and uncertainty, it can be profitable for a powerful content provider to resort to paid content peering, thus transferring to the ISP a part of his content provision revenue. The resulting business model may provide substantial benefits to all major participants in this ecosystem: network providers, content and service providers and end users. After this we consider competition in the Internet provision sector and show that - also in this case - the paid content peering can help ISPs to expand the network capacity and at the same time increase profits of content providers. The end users benefit from the lower prices for content services. Finally, we consider the situation when an ISP differentiates the service offer by engaging in content provision, thus entering in direct competition with content providers.

We analyze the effect of sponsored data when Internet service providers (ISPs) compete for subscribers and content providers (CPs) compete for a share of the bandwidth usage by customers. Our model is of a full information, leader-follower game. ISPs lead and set sponsorship prices. CPs then make the binary decision of sponsoring or not sponsoring their content on the ISPs. Lastly, based on both of these, users make a two-part decision-choose the ISP to subscribe to, and amount of data to consume from each CPs through the chosen ISP. User consumption is determined by a utility maximization framework, sponsorship decision is determined by a non-cooperative game between CPs, and ISPs set their prices to maximize their profit in response to prices set by competing ISP. We analyze the dynamics of the prices set by ISPs, the sponsorship decisions of CPs, the market structure therein, and surpluses of the ISPs, CPs, users. This is the first analysis of the effect sponsored data in the presence of ISP competition. We show that inter-ISP competition does not inhibit ISPs from extracting a significant fraction of CP surplus, leaving CPs no better off (and sometimes worse off) as compared to the scenario where data sponsoring is disallowed. Moreover, ISPs often have an incentive to significantly skew the CP marketplace in favor of the most profitable CP.

We analyze the effect of sponsored data platforms when Internet service providers (ISPs) compete for subscribers and content providers (CPs) compete for a share of the bandwidth usage by the customers. Our analytical model is of a full information, leader-follower game. ISPs lead and set prices for sponsorship. CPs then make the binary decision of sponsoring or not sponsoring their content on the ISPs. Lastly, based on both of these, users make a two-part decision of choosing the ISP to which they subscribe, and the amount of data to consume from each of the CPs through the chosen ISP. User consumption is determined by a utility maximization framework, the sponsorship decision is determined by a non-cooperative game between the CPs, and the ISPs set their prices to maximize their profit in response to the prices set by the competing ISP. We analyze the pricing dynamics of the prices set by the ISPs, the sponsorship decisions that the CPs make and the market structure therein, and the surpluses of the ISPs, CPs, and users. We show that inter ISP competition does not inhibit ISPs from extracting a significant fraction of the CP surplus. Moreover, the ISPs often have an incentive to significantly skew the CP marketplace in favor of the most profitable CP.

Data traffic demand over the Internet is increasing rapidly, and it is changing the pricing model between Internet service providers (ISPs), content providers (CPs) and end users. One recent pricing proposal is sponsored data plan, i.e., when accessing contents from a particular CP, end users do not need to pay for that volume of traffic consumed, but the CP will sponsor for this data consumption. In this paper, our goal is to understand the rationale behind this new pricing model, as well as its impacts to the wireless data market, in particular, who will benefit and who will be hurt from this scheme. We build a two-class service model to analyze the consumers' traffic demand under the sponsored data plan with consideration of QoS. We use a two-stage Stackelberg game to characterize the interaction between CPs and the ISP and reveal a number of important findings. Our conclusions include: 1) When the ISP's capacity is sufficient, the sponsored data plan benefits consumers and CPs in the short run, but the ISP does not have incentives to further improve its service in the long run. 2) When ISP's capacity is insufficient, the ISP and end users may achieve a win- win trade, while the ISP and CPs always compete for the revenue. 3) The sponsored data plan may enlarge the un- balance in revenue distribution between different CPs; CPs with higher unit income and poorer technology support are more likely to prefer the sponsored data plan.

Data traffic demand over the Internet is increasing rapidly, and it is changing the pricing model between Internet service providers (ISPs), content providers (CPs) and end users. One recent pricing proposal is sponsored data plan, i.e., when accessing contents from a particular CP, end users do not need to pay for that volume of traffic consumed, but the CP will sponsor for this data consumption. In this paper, our goal is to understand the rationale behind this new pricing model, as well as its impacts to the wireless data market, in particular, who will benefit and who will be hurt from this scheme. We build a two-class service model to analyze the consumers' traffic demand under the sponsored data plan with consideration of QoS. We use a two-stage Stackelberg game to characterize the interaction between CPs and the ISP and reveal a number of important findings. Our conclusions include: 1) When the ISP's capacity is sufficient, the sponsored data plan benefits consumers and CPs in the short run, but the ISP does not have incentives to further improve its service in the long run. 2) When ISP's capacity is insufficient, the ISP and end users may achieve a win- win trade, while the ISP and CPs always compete for the revenue. 3) The sponsored data plan may enlarge the un- balance in revenue distribution between different CPs; CPs with higher unit income and poorer technology support are more likely to prefer the sponsored data plan.

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.

Content delivery networks (CDNs) have been providing the key engineering and economic mediation between content providers (CPs) and Internet service providers (ISPs) in content delivery over the Internet. They significantly improve the quality of service experience for today's Internet traffic. We model the CDN as a business-to-business platform that provides caching and other services in the Internet content delivery chain between the CPs and the ISPs. The CPs and ISPs that subscribe to the CDN receive a traffic boost relative to their base traffic and in return the CDN prescribes a subscription charge to the CPs, and to the ISPs. We assume that the CDN provides its service without price or quality differentiation between the CPs (or between the ISPs). In this setting we analyze the revenue maximizing prices of the CDN on the two sides of the platform, and its effect on the connection structure on the two sides. We first consider the oligopoly model, where we formulate a full information, leader-follower game. The CDN is the leader and sets the subscription prices for the CPs and the ISPs. The ISPs and CPs are the followers and they make the binary decision of subscribing to the CDN or not. We extend this model to a retail CP market, where the CDN determines the revenue maximizing price using a heuristic and the CPs make the subscription decision. Using extensive numerical analyses, we show that the CDN will always provide sufficient resources to the CPs and that the revenue maximizing price will essentially price out the CPs and ISPs that have a low monetization capability.