Zero-rating Internet platforms formation: a game theoretic analysis

Abstract

Zero-rating Internet is a term that is used for not counting data usage of end-users for accessing basic capabilities of some websites via mobile network operators. Recently, an open zero-rating platform called Free Basics is offered by Facebook which in addition to providing free basic services of Facebook to the end-users, it allows other websites to provide their contents as zero-rated through the platform for free. In this paper, we provide a game theoretic analysis to investigate the reasons behind the formation of fully or partially open zero-rating platforms such as Free Basics. For this purpose, a variant of a specific dynamic game called asymmetric volunteer’s timing dilemma is used to model zero-rating platforms formation with content providers as the players. The general solution of the game is determined as a form of sub-game perfect Nash equilibrium (SPNE). Moreover, specific forms of utility functions for content providers are introduced with consideration of network effects to draw SPNE of the game and demonstrate the behaviors of the involved parameters in the game results. The modeling and its solution helps us to explain current state of the zero-rating platforms and its stability. In particular, our result is in accord with the formation of Free Basics platform by Facebook.