Toward Equitable Peering: A Proposal for a Fair Peering Fee Between ISPs and Content Providers

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.

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.

While some broadband providers have called Internet content and application providers free riders on their infrastructure, this is incorrect and misguided. End-users pay for their residential broadband providers for access to the Internet, and content providers pay their own ISPs for connectivity as well. However, content providers need not pay residential broadband providers’ ISPs in order to reach their customers. This feature of the Internet has been one key factor that has allowed innovation to prosper and kept barriers to entry low, as the network transport market for content and application providers functions relatively efficiently. In this paper, I consider the impact of a departure from this current system. I examine the possible impact of last-mile broadband providers’ imposing “termination fees” on third-party content providers or application providers to reach end-users. Broadband providers would engage in paid prioritization arrangements – that is, application and content providers could pay the broadband provider to have their traffic prioritized over competitors’ services. I argue that these arrangements would create inefficiency in the market and harm innovation. Because the last mile access broadband market is concentrated and consumers face switching costs, these concerns are particularly significant. Broadband providers insist that imposing these new charges will greatly improve network investment, and thus these charges are beneficial. I argue that this is not the case. Possible higher revenues from discrimination may simply be returned to shareholders and not invested. Additionally, evidence suggests networks invest more under non-discrimination requirements, and paid prioritization schemes would divert money towards managing scarcity instead of expanding capacity. Paid prioritization could even create an incentive for broadband providers to create congestion to increase the price of prioritized service.

PurposeThis paper investigates the paths through which innovation community affects content providers' new service development (NSD) performance in technology-based service ecosystem and contingency factors exist in the paths.Design/methodology/approachThe research model is built based on service-dominant (S-D) logic, exploring the relationship among innovation community, content providers' knowledge acquisition and content providers' NSD performance as well as the moderating role of content providers' technology readiness and content providers' complexity. Using survey data collected from 386 content providers of selected open network platforms in China, this study finds broad support for the proposed research model.FindingsThe findings of this paper reveal that content providers' tacit knowledge acquisition from users plays a mediating role between the innovation community and new service ratings. Content providers' technology readiness plays a positive moderating role in the relationship between innovation community and their explicit or tacit knowledge acquisition. Content providers' task complexity negatively moderates the effects of their explicit knowledge acquisition from users on new service volumes or ratings, but positively moderates the effects of tacit knowledge acquisition from users on new service volumes or ratings.Originality/valueThough extant literature highlights the importance of knowledge acquisition in NSD performance, few studies explore the antecedents of content providers' knowledge acquisition from users and the paths through which these antecedents affect content providers' NSD performance. Moreover, boundary conditions exist in the process of improving NSD performance are generally ignored in previous literature. With the lens of S-D logic, this paper explicates how content providers of different technology readiness and different task complexity enhance their new service volumes and ratings through acquiring explicit and tacit knowledge from users in innovation community. Adopting S-D logic from marketing area to NSD area, this paper not only enriches the theoretical accumulations of antecedents and boundary conditions of content providers' NSD performance but also offers insights for content providers and users on how to synergistically advance NSD activities and co-create value in the technology-based service ecosystem.

Many independent content providers (CPs) offer free content through a dominant platform (e.g., an app store) and obtain revenues later from the usage of their content (e.g., through ads or in-app purchases). Attaining a more prominent placement on the platform is important for CPs, because it gives them more demand, and thus more revenues. We consider CPs' investment incentives to produce content quality under various ranking algorithms when the dominant platform demands a share of the CPs' revenues. We consider a game-theoretic model in which two CPs that differ in their efficiency to produce content quality compete for prominence on the platform. The platform commits to a revenue share and to a ranking algorithm that is either based on content quality (organic ranking) or bids (sponsored ranking), or a combination thereof. We highlight that CPs' incentives to invest in content quality under a given ranking regime can be explained by the interaction of four effects, that we denote as competition, uncertainty, revenue-share, and payment-reduction effect. We highlight how the strengths of these effects vary between different rankings and that it depends crucially on the CPs’ efficiency differences and the platform’s uncertainty to assess content quality which ranking yields the highest content quality, consumer surplus and platform profit. For instance, we show that under a pure sponsored ranking the platform demands the lowest revenue share, and that this ranking provides the highest investment incentives when CPs’ efficiency differences and the platform’s uncertainty are relatively high. We also study the case where the platform is vertically integrated with one CP and biases the ranking towards its own CP. We show that the platform's self-preferencing lowers the content quality of the non-integrated CP, but that vertical integration yields a significant increase of the integrated CP's content quality, and can result in an overall higher consumer surplus. Therefore, our results bear important implications for the regulation of digital content platforms.

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

We study competition between users over access to content in a telecom market that includes several access providers and several content providers. We focus situations where exclusive agreements exist between content and access providers, which allows access providers to offer content services for free for their subscribers. We call access providers having such agreements super providers or service providers. We show that the competition between the users results in a paradoxical phenomenon in which subscribers of enhanced providers prefer to defer part of their demand to other content providers whose content is costly. We show how this phenomena can be exploited by the content providers so as to maximize their benefits.

In a world of increasing digitalization platforms, business models are booming in many sectors. This trend is also growing in the entertainment industry and can be observed in regard to smart TVs and the operating systems that serve as content platforms. Of key interest are the factors that drive decision-making when content providers have to choose which specific smart TV platform to partner. Akin to betting their brand on an uncertain technological foundation, what criteria do providers/aggregators most value? To help answer this question, a number of interviews with industry experts were conducted. The results showed that choosing the “right” smart TV platform is indeed important to content providers – and becoming increasingly so as markets further shift toward connected devices and internet-of-things. Factors like reach of the platform and its long-term commercial viability are pivotal. Providers want a solid foundation for growth/expansion and partner(s) whose own success can draw them along. Surprisingly, factors related to individual consumer choice seem to play a relatively minor role. Pushing into the third decade of the 21st century it remains to be seen how the dynamic environment of smart TV platforms will develop – and how the choices of content aggregators and providers will ultimately help shape it. However, some indicators are already here.

Net Neutrality, Network Investment and Content Quality

Rapid technological developments and deregulation of the telecommunications industry have changed the way in which content providers distribute and price their goods and services. Instead of selling a bundle of content and access through proprietary networks, these firms are shifting their distribution channels to the Internet. In this new setting, the content and Internet service providers find themselves in a relationship that is simultaneously cooperative and competitive. We find that proprietary content providers prefer the Internet channels to direct channels only if the access market is sufficiently competitive. Furthermore, maintaining a direct channel in addition to the Internet channels changes the equilibrium enough that the proprietary content providers prefer having the Internet channels, regardless of the level of competition in the access market. Telecommunications technology developments uniformly increase content providers' profit. On the other hand, the technology impact on Internet service provider profits is nonmonotonic: Their profits may increase or decrease as a result of lower telecommunication costs. While initially the ISP profit increases as more customers are drawn to the Internet, it eventually decreases as the spatial competition becomes more intense. We also show that proprietary content providers should benefit from having some free content available at the Internet service providers' sites to induce more customers to join the Internet.

Social Welfare and Policy Impact on Emerging ISP-Content Provider Relationships

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.

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

In January 2014, AT&T introduced sponsored data to the U.S. mobile data market, allowing content providers (CPs) to subsidize users' cost of mobile data. As sponsored data gains traction in industry, it is important to understand its implications. This work considers CPs' choice of how much content to sponsor and the implications for users, CPs, and ISPs (Internet service providers). We first formulate a model of user, CP, and ISP interaction for heterogeneous users and CPs and derive their optimal behaviors. We then show that these behaviors can reverse our intuition as to how user demand and utility change with different user and CP characteristics. While all three parties can benefit from sponsored data, we find that sponsorship disproportionately favors less cost-constrained CPs and more cost-constrained users, exacerbating CP inequalities but making user demand more even. We also show that users' utilities increase more than CPs' with sponsored data. We finally illustrate these results in practice through numerical simulations with data from a commercial pricing trial and introduce a framework for CPs to decide which, in addition to how much, content to sponsor.

The distribution of video contents generated by Content Providers (CPs) significantly contributes to increase the congestion within the networks of Internet Service Providers (ISPs). To alleviate this problem, CPs can serve a portion of their catalogues to the end users directly from servers (i.e., the caches) located inside the ISP network. Users served from caches perceive an increased QoS (e.g., average retrieval latency is reduced) and, for this reason, caching can be considered a form of traffic prioritization. Hence, since the storage of caches is limited, its subdivision among several CPs may lead to discrimination. A static subdivision that assignes to each CP the same portion of storage is a neutral but ineffective appraoch, because it does not consider the different popularities of the CPs' contents. A more effective strategy consists in dividing the cache among the CPs proportionally to the popularity of their contents. However, CPs consider this information sensitive and are reluctant to disclose it. In this work, we propose a protocol based on Shamir Secret Sharing (SSS) scheme that allows the ISP to calculate the portion of cache storage that a CP is entitled to receive while guaranteeing network neutrality and resource efficiency, but without violating its privacy. The protocol is executed by the ISP, the CPs and a Regulator Authority (RA) that guarantees the actual enforcement of a fair subdivision of the cache storage and the preservation of privacy. We perform extensive simulations and prove that our approach leads to higher hit-rates (i.e., percentage of requests served by the cache) with respect to the static one. The advantages are particularly significant when the cache storage is limited.