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

Abstract

Problem definitionConsumer multihoming behaviour challenges the sponsored data business model initiated by internet service providers (ISPs) associated with content providers (CPs). Academic/practical relevanceDifferent from data subsidization research which focuses on the CPs having no exclusive content and consumer exhibiting only single-homing behaviour, we explore the interplay between a monopolistic ISP and two competing CPs in the presence of consumer multihoming behaviour. We capture the effect of CPs’ differences in operational characteristics (e.g., exclusive content and revenue rate) on the ISP's data plan, CPs’ subsidy regime, and consumer multihoming behaviour. MethodologyWe develop a game-theoretical model with an ISP and two competing content providers (CPs) offering overlapping (i.e., non-exclusive) content and exclusive content to consumers who may have multihoming behaviour. The monopolist ISP designs its data plans by providing the subsidy options for neither, one, or both CPs (represented as strategies N, O, and B), and it announces a usage-based per-packet price. In response, the involved CPs decide the subsidy regime, based on which consumers choose between single-homing and multihoming. ResultsWe find that the CPs’ exclusive content popularity and revenue rate are critical considerations for the ISP in designing the data plans. Only when the revenue rate is high will the ISP allow both CPs to subsidize data; otherwise, it prefers strategy N for high exclusive content (i.e., when a large amount of exclusive content) but strategy O for low exclusive content. For CPs, strategy O induces consumers to choose multihoming when the exclusive content is high, and strategy B further stimulates some consumers to switch from single-homing to multihoming for a high revenue rate. Interestingly, the subsidy amount is not affected by the revenue rate in strategy O after the revenue rate exceeds a threshold. Moreover, we identify conditions under which the ISP's data plan promotes the consumer surplus and social welfare. Managerial implicationsOur study sheds light on the influence of consumer multihoming behaviour on the co-opetition in the streaming industry. It provides insights for ISPs and CPs in the recent debate on the effect of sponsored data on consumer surplus and social welfare.