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Network Neutrality: Pricing
perspective
Bikram Acharya
12-12-2012
Outline
• Introduction
– Proponents views
– Opponents view
– How it came to floor
• Methodologies
• Conclusion
Keywords
• Network Neutrality
• Pricing scheme: Flat rate and Usage base
• Tiered services
Principles of Network Neutrality
Transparency. Fixed and mobile broadband providers must disclose
the network management p...
Network Neutrality
• Openness vs. managing traffic
• Debate in public, struggle in
legislation, war in the Internet
• ISPs...
Network Neutrality
• Internet was based on the fundamental principles of
openness and non-discrimination
• Today the Inter...
Network Neutrality
• Internet is the primary global network for
digital communications
• information packets are transport...
What proponent say
• Control of data
– Cable and internet company must
allow ISPs free access to their
networks and should...
What opponent say
• Innovation and investment
• Tiered internet could make for a better internet
• Illegally downloading m...
How it came to floor
• Rise of Internet bandwidth:
causing network congestion to
network
– Terrestrial network constructio...
Pricing scheme: Flat rate and Usage base
• Service providers are discriminating traffic
either technological purposes (bit...
Examples
• charge consumers more than “only once” through
usage based pricing
• charge content providers through side-payments
Pric...
Pricing scheme: Flat rate and Usage base
Stage utility
Basic non-cooperative
cooperative
Side-payments->non-cooperation
Ad...
Conclusion
• Total demand is not changed and the side payment controls
by the ISP so which should be regulated
• In either...
Reference
Altman,E., et al, 2011, A model of network neutrality with usage-based prices
Hwang, Junseok , Lee, Daeho and Le...
Thank you
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Network neutrality 12 12_12

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  • Hahn, R., & Wallsten, S. (2006). The economics of net neutrality. Economists’ Voice, 3(6), 1–7.
  • Interview with Ed Whitacre, BusinessWeek November 7, 2005. Q: How concerned are you about Internet upstarts like Google (GOOG), MSN, Vonage, and others? A: How do you think they’re going to get to customers? Through a broadband pipe. Cable companies have them. We have them. Now what they would like to do is use my pipes free, but I ain’t going to let them do that because we have spent this capital and we have to have a return on it. So there’s going to have to be some mechanism for these people who use these pipes to pay for the portion they’re using. Why should they be allowed to use my pipes? The Internet can’t be free in that sense, because we and the cable companies have made an investment and for a Google or Yahoo! (YHOO) or Vonage or anybody to expect to use these pipes [for] free is nuts!
  • Hwang, Junseok , Lee, Daeho and Lee, Kayeong, Internet Pricing and Network Neutrality: How Internet Pricing Schemes Affect the Incentives of Internet Service Providers (March 31, 2011).Robert J. B, and Paul M. R, 1987, Ski-Lift Pricing, with Applications to Labor and Other Markets
  • Begrlas, E., 1976, On the theory or Clubs
  • Transcript of "Network neutrality 12 12_12"

    1. 1. Network Neutrality: Pricing perspective Bikram Acharya 12-12-2012
    2. 2. Outline • Introduction – Proponents views – Opponents view – How it came to floor • Methodologies • Conclusion
    3. 3. Keywords • Network Neutrality • Pricing scheme: Flat rate and Usage base • Tiered services
    4. 4. Principles of Network Neutrality Transparency. Fixed and mobile broadband providers must disclose the network management practices, performance characteristics, and terms and conditions of their broadband services; No blocking. Fixed broadband providers may not block lawful content, applications, services, or non-harmful devices; mobile broadband providers may not block lawful websites, or block applications that compete with their voice or video telephony services No unreasonable discrimination. Fixed broadband providers may not unreasonably discriminate in transmitting lawful network traffic. 4
    5. 5. Network Neutrality • Openness vs. managing traffic • Debate in public, struggle in legislation, war in the Internet • ISPs are already installing middleboxes capable of degrading/changing/blocking popular applications • But without going either sides …we want to facilitate network accountability
    6. 6. Network Neutrality • Internet was based on the fundamental principles of openness and non-discrimination • Today the Internet is an information highway where anybody –no matter how large or small, how traditional or unconventional –has equal access (Google,2012) • Consumers and innovators do not have to seek permission before they use the Internet to launch new technologies, start businesses, connect with friends, or share their views. • usually means that broadband service providers charge consumers only once for Internet access, do not favor one content provider over another, and do not charge content providers for sending information over broadband lines to end users (Hahn, R., & Wallsten, S. ,2006).
    7. 7. Network Neutrality • Internet is the primary global network for digital communications • information packets are transported on the Internet under ‘‘network neutrality” and does not distinguish in terms of price between bits or packets depending on the services • Contract of ISP with customer gives the customer access to the whole Internet through a physical or virtual pipe of a certain bandwidth and same as ISP to backbone provider
    8. 8. What proponent say • Control of data – Cable and internet company must allow ISPs free access to their networks and should not screening or filtering of data • Digital rights and freedoms – Ensures that the Internet remains a free and open technology • Competition and Innovation – Preserving Internet standards End-to- end principle
    9. 9. What opponent say • Innovation and investment • Tiered internet could make for a better internet • Illegally downloading music, movies, software, etc. Copyright. • Bandwidth availability • Opposition to legislation • Spam, Virus “Now what they would like to do is use my pipes free, but I ain’t going to let them do that because we have spent this capital and we have to have a return on it” - Ed Whitacre, CEO, AT&T https://www.google.com/intl/en/takeaction/whats-at-stake/
    10. 10. How it came to floor • Rise of Internet bandwidth: causing network congestion to network – Terrestrial network construction, upgrade, and operating costs – Undersea cable construction, upgrade, operating, and unit costs • Rise of bandwidth intensive application • Application based tiered services Source: Telegeography.com
    11. 11. Pricing scheme: Flat rate and Usage base • Service providers are discriminating traffic either technological purposes (bit torrent) or for economic (low incentive providing high bandwidth application) • Flat Rate Pricing scheme: – flat-rate pricing scheme, the ISP generally has an incentive to discriminate against certain content providers' packets by increasing the packet delay (Hwang, J., Lee, D., Lee, K, 2011). – economic welfare would be better served if end users were charged flat rates instead of usage-sensitive prices(Robert J. B, and Paul M. R, 1987) – usage-based pricing scheme, the ISP has no incentive to discriminate against packets (Hwang, J., Lee, D., Lee, K, 2011). Pricing scheme to motivate network provider Source: http://torrentfreak.com/bittorrent-still-dominates-global-internet-traff
    12. 12. Examples
    13. 13. • charge consumers more than “only once” through usage based pricing • charge content providers through side-payments Pricing scheme: Flat rate and Usage base ISP Customer CP • Internet users • Network provider • Content provider The two providers play a game to settle on their (usage based) prices. The users are modeled through their demand response. Content provider gets revenues from advertisement, pay per click Provider i’s usage-based revenue is given by D0 is parameter under flat rate pricing Demand should be non negative For non-cooperative game For i=1,2 Which leads p1 *=p1 *=D0/3d and demand at equilibrium D*=D0/3 Revenue of each provider is Ui *=D0 2/9d
    14. 14. Pricing scheme: Flat rate and Usage base Stage utility Basic non-cooperative cooperative Side-payments->non-cooperation Advertising revenues Non-cooperation cooperation ISP providing multiple service classes cooperation Stackelberg equilibrium ISP Leader and CP Follower CP Leader and ISP Follower
    15. 15. Conclusion • Total demand is not changed and the side payment controls by the ISP so which should be regulated • In either case of leader-follower dynamics, the leader obtains twice the utility of the follower at the Equilibrium • This model considers monopolistic scenario in either case of the leader changes usage price there is no change in equilibrium • competitive markets will reach an efficient equilibrium if each user is charged a usage-sensitive price set equal to their marginal contribution to congestion (Begrlas, E., 1976) • Social Welfare will be maximized if usage based pricing scheme is used.
    16. 16. Reference Altman,E., et al, 2011, A model of network neutrality with usage-based prices Hwang, Junseok , Lee, Daeho and Lee, Kayeong, 2011 ,Internet Pricing and Network Neutrality: How Internet Pricing Schemes Affect the Incentives of Internet Service Providers Robert J. B, and Paul M. R, 1987, Ski-Lift Pricing, with Applications to Labor and Other Markets Google,2012, ,“A Guide to Net Neutrality for Google Users". Retrieved 29,Nov,2012 Jan Krämer, Lukas Wiewiorra,2012, Network Neutrality and Congestion Sensitive Content Provider Implications for Content Variety, Broadband Investment, and Regulation Begrlas, E., 1976, On the theory or Clubs Hahn, R., & Wallsten, S. (2006). The economics of net neutrality. Economists’ Voice, 3(6), 1–7.
    17. 17. Thank you
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