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.

It has been a long demand of Internet Service Providers (ISPs) that the Content Providers (CPs) share their profits for investments in network infrastructure. In this paper, we study profit sharing contracts between a CP with multiple ISPs. Each ISP commits to improving the Quality of Service (QoS) for the end-users through higher investments efforts. The CP agrees to share the profits due to the resulting higher demand for its content. We first model non-cooperative interaction between the CP and the ISPs as a two-stage Stackelberg game. CP is the leader that decides what fraction of its profits will be shared with the ISPs. Each ISP then simultaneously decides the amount of effort (investment) to enhance network quality. Here, CP cannot observe individual effort by the ISPs, which poses a challenge for the CP to decide how to share the profits with each ISP. Therefore, we also investigate a cooperative scenario, where the CP only decides the total share it gives to the ISPs, and each ISP then cooperatively shares the profit among themselves. We study the effect of such cooperation between the ISPs by building a Nash Bargaining based model. We show that the collaboration improves total effort by the ISPs and the payoff of the CP.

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.

We consider the problem of revenue sharing contracts between Content Providers (CPs) to a common Internet Service Provider (ISP). Under the contract, the ISP makes investment decisions to improve network infrastructure that in turn improves the quality of service for the end-users. Such contracts are studied under the neutral and non-neutral regime where it is observed that the neutral regime yields lower social utility though it is preferred from the point of view of making the Internet a level platform for CPs of all 'size.' In this work, we propose a soft-neutral regime for revenue sharing in the Moral Hazard framework that alleviates the loss in social utility in the neutral regime. The 'softness' of the regime is parametrized by a single variable and spans the neutral and the non-neutral regime as we vary it between two extremes. We evaluate the social utility in the soft neutral regime and show its improvements over the neutral regime.

Usage-based pricing has been recognized as a network congestion management tool. Internet Service Providers (ISPs), however, have limited ability to set time-adaptive usage-price to manage congestion arising from time-varying consumer utility for data. To achieve the maximum revenue, ISP can set its time-invariant usage-price low enough to aggressively encourage consumer's traffic demand. The downside is that ISP has to drop consumer's excessive traffic demand through congestion management (i.e., packet dropping), which may degrade Quality of Service (QoS) of consumer's traffic. Alternatively, to protect consumer's QoS, ISP can set its time-invariant usage-price high enough to reduce consumer's traffic demand, thus minimizing the need for congestion management through packet dropping. The downside is that ISP suffers a revenue loss due to the inefficient usage of its network. The tradeoff between ISP's revenue maximization and consumer's QoS protection motivates us to study ISP's revenue maximization subject to QoS constraint in terms of the number of packets dropped. We investigate two different QoS measures: short-term per-slot packet dropping constraint and long-term packet dropping constraint. The short-term constraint can be interpreted as a more transparent congestion management practice compared to the long-term constraint. We analyze ISP's optimal time-invariant pricing for both constraints, and develop an upper bound for the optimal revenue by considering the specified packet dropping threshold. We quantify the impact of consumer's price elasticity on ISP's optimal revenue and show that ISP should carry out a differentiated QoS protection strategy based on consumer's price elasticity in order to mitigate the revenue loss1.

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.

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.

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.

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.

Capacity expansion of neutral ISPs via content provider participation: The bargaining edge

The use of content delivery services in which users pay a fee for each content delivery to the content provider (CP) is dramatically increasing. For Internet service providers (ISPs), the increased investment cost required to maintain stable quality for delivering rich content is a serious 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 a transit fee in which the increase ratio diminishes as the volume of transmitted data increases, so the revenue collected 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 an ISP introduces a content charge, so introducing a content charge may not always increase the revenue of ISPs. Assuming a competitive environment of two ISPs in which one ISP introduces a content charge and each ISP can freely set its charging parameter, this paper models the relationship among CPs and two ISPs using a three-stage Stackelberg game and investigates the effect of a content charge by ISPs on the revenue of each player.

The current escalation in user demand for web contents, particularly Video on Demand (VoD), is causing a continuing increase in both the types of web traffic and the volumes of data transmitted. The greater demand arises from the new means of communication employed by individuals and companies, as well as the development of readily usable applications distributed by ‘app stores’. In this paper, we suggest that the stakeholders of a VoD framework, the Content Providers (CPs) and the Internet Service Providers (telcos/ISPs), should guarantee a solid Quality of Experience (QoE) to the end user through two potential investments: either in ultra-broadband (UBB) or in the technologies for the acceleration of web content, known as the Content Delivery Network (CDN) and Transparent Internet Caching (TIC). The aim of the paper is to analyse these investments in terms of providers' profits. The base hypothesis is that the investments are subsidized by the CPs, which, in recent years, have indeed been directing a large part of their revenues towards investments in network infrastructure.

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

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.

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.