Economic Models of Communication Networks

Abstract

Standard performance evaluations of communication networks focus on the technology layer where protocols define precise rules of operations. Those studies assume a model of network utilization and of network characteristics and derive performance measures. However, performance affects how users utilize the network. Also, investments by network providers affect performance and consequently network utilization. We call the actions of users and network providers the "economic layer" of the network because their decisions depend largely on economic incentives. The economic and technology layers interact in a complex way and they should be studied together. This tutorial explores economic models of networks that combine the economic and technology layers. IntroductionWhy were QoS mechanisms for end users not implemented in the Internet? Should users have a choice of grade of service for different applications? Why is security of the Internet so poor? Should Internet service providers be allowed to charge content providers for transporting their traffic? Should cell phones be unlocked to work with multiple operators? Should municipalities deploy free Wi-Fi networks? How should different services of a WiMAX network be priced?These questions that affect the future of communication networks go beyond technology. However, their answers certainly depend on technological features. Different protocols enable or prevent choices of users and influence the revenue of operators and, consequently, their investment incentives. The engineers who define network protocols typically focus on their performance characteristics but are largely unaware of the market consequences of their designs.

Utility-Optimal Partial Spectrum Leasing for Future Wireless Services

“…We introduce a user type parameter to model different willingness to pay as in [9], [10]. The higher v users have more payoff for the same data-rate.…”

Guaranteeing user welfare in network service

“…Willingness to pay and the QoS required by users are positively correlated. To model user behavior, we define the user type as in [9,10]. The user type α is a variable over [0, 1] that quantifies the willingness to pay of a user.…”

Congestion-aware internet pricing for media streaming

“…Current Internet or mobile service users are mostly charged in the so-called usage-based pricing model [2], [5]: users are charged either 1) a fixed monthly fee under a "Capped" plan, or 2) a "Metered" fee which is proportional to the volume of data usage, or 3) a combination of 1) and 2) in a "Cap then metered" plan, in which a user pays a flat fee up to a certain cap on data usage, beyond which the user is charged in proportion to the usage. For example, in 2010, AT&T introduced a $15/month data plan for 200 MB and $25/month for 2 GB, with different rates of overage charges for the two tiers [6], [7].…”