On flat-rate and usage-based pricing for tiered commodity internet services

Kesidis, George; Das, Abhinav; Veciana, Gustavo de

doi:10.1109/ciss.2008.4558540

Cited by 49 publications

(35 citation statements)

References 14 publications

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“…Access pricing is typically in the form of a flat rate that is independent of usage, or a usage based price, or some combination of the two pricing schemes [1], [2]. We quantify that a significant component of the monopoly ISP revenue is from flat price if consumer price sensitivity is low and through usage price if consumer price sensitivity is high.…”

Section: Overviewmentioning

confidence: 99%

Pricing under Constraints in Access Networks: Revenue Maximization and Congestion Management

Hande

Chiang

Calderbank

et al. 2010

2010 Proceedings IEEE INFOCOM

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Abstract-This paper investigates pricing of Internet connectivity services in the context of a monopoly ISP selling broadband access to consumers. We first study the optimal combination of flat-rate and usage-based access price components for maximization of ISP revenue, subject to a capacity constraint on the datarate demand. Next, we consider time-varying consumer utilities for broadband data rates that can result in uneven demand for data-rate over time. Practical considerations limit the viability of altering prices over time to smoothen out the demanded datarate. Despite such constraints on pricing, our analysis reveals that the ISP can retain the revenue by setting a low usage fee and dropping packets of consumer demanded data that exceed capacity. Regulatory attention on ISP congestion management discourages such "technical" practices and promotes economics based approaches. We characterize the loss in ISP revenue from an economics based approach. Regulatory requirements further impose limitations on price discrimination across consumers, and we derive the revenue loss to the ISP from such restrictions. We then develop partial recovery of revenue loss through non-linear pricing that does not explicitly discriminate across consumers. While determination of the access price is ultimately based on additional considerations beyond the scope of this paper, the analysis here can serve as a benchmark to structure access price in broadband access networks. I. OVERVIEWThis paper studies the impact of access prices on the congestion management practices and revenue of a monopoly ISP, operating a single bottleneck link with fixed capacity. Although Internet data flows along multiple links on a route between source and destination, the end-user access link is typically the most constrained for capacity, and the major contributor to the connectivity price. Consumer data rate allocation can be determined by socially optimal prices in a competitive market on the one hand, or the revenue maximizing prices in a monopoly ISP market on the other hand. The analysis in this paper explores the latter and represents a benchmark: the most favorable outcome to the ISP and possibly the least favorable outcome to the consumers.The analysis will serve as a basis to understand the pricing of shared access links in wireline and wireless broadband. The analysis has particular significance to pricing wireless broadband as consumers demand high-rate wireline-like applications and content over relatively lower-rate wireless broadband.Access pricing is typically in the form of a flat rate that is independent of usage, or a usage based price, or some combination of the two pricing schemes [1], [2]. We quantify that a significant component of the monopoly ISP revenue is from flat price if consumer price sensitivity is low and through usage price if consumer price sensitivity is high. Flat pricing is generally considered as the preferred choice of consumers [3], but our analysis indicates that flat pricing can lead to a significant loss of co...

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Section: Overviewmentioning

confidence: 99%

Pricing under Constraints in Access Networks: Revenue Maximization and Congestion Management

Hande

Chiang

Calderbank

et al. 2010

2010 Proceedings IEEE INFOCOM

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show abstract

“…Flatrate pricing models, where prices stay flat up to a threshold data consumption, are not uncommon either, especially in the U.S. wireline market today. Several papers have addressed the comparison with usage dependent pricing [13], [14]. Translating prices on data rates to that on volume of data can be accommodated by considering the time period over which the volume of data is calculated, and a multiplexing factor that captures the effect of the volume of data on capacity requirements.…”

Section: Practical Considerations and Illustrationmentioning

confidence: 99%

Network Pricing and Rate Allocation with Content Provider Participation

et al. 2009

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Abstract-Pricing content-providers for connectivity to endusers and setting connection parameters based on the price is an evolving model on the Internet. The implications are heavily debated in telecom policy circles, and some advocates of "Network Neutrality" have opposed price based differentiation in connectivity. However, pricing content providers can possibly subsidize the end-user's cost of connectivity, and the consequent increase in end-user demand can benefit ISPs and content providers. This paper provides a framework to quantify the precise trade-off in the distribution of benefits among ISPs, content-providers, and end-users.The framework generalizes the well-known utility maximization based rate allocation model, which has been extensively studied as an interplay between the ISP and the end-users, to incorporate pricing of content-providers. We derive the resulting equilibrium prices and data rates in two different ISP market conditions: competition and monopoly. Network neutrality based restriction on content-provider pricing is then modeled as a constraint on the maximum price that can be charged to content-providers. We demonstrate that, in addition to gains in total and enduser surplus, content-provider experiences a net surplus from participation in rate allocation under low cost of connectivity. The surplus gains are, however, limited under monopoly conditions in comparison to competition in the ISP market.

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“…[32]), more complex models of end-user demand and their collective social welfare, and the effects of different options for flat-rate pricing (e.g. [33,35]). …”

Section: Literature Surveymentioning

confidence: 99%

Net Neutrality and Quality of Service

Altman

Rojas

Wong

et al. 2012

Lecture Notes of the Institute for Computer Sciences, Social Informatics and Telecommunications Engineering

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Abstract. 2010 has witnessed many public consultations around the world concerning Net neutrality. A second legislative phase that may follow, could involve various structural changes in the Internet. The status that the Internet access has in Europe as a universal service evolves as the level of quality of service (QoS) to be offered improves. If guarantees on QoS are to be imposed, as requested by several economic actors, it would require introducing new indicators of quality of services, as well as regulation legislation and monitoring of the offered levels of QoS. This tendency in Europe may change the nature of the Internet from a best effort network to, perhaps, a more expensive one, that offers guaranteed performance. This paper presents an overview of the above issues as well as an overview of recent research on net-neutrality, with an emphasis on game theoretical approaches.

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On flat-rate and usage-based pricing for tiered commodity internet services

Cited by 49 publications

References 14 publications

Pricing under Constraints in Access Networks: Revenue Maximization and Congestion Management

Pricing under Constraints in Access Networks: Revenue Maximization and Congestion Management

Network Pricing and Rate Allocation with Content Provider Participation

Net Neutrality and Quality of Service

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