Pricing under constraints in access networks: Revenue maximization and congestion management

Prashanth Hande, Mung Chiang, Robert Calderbank, Junshan Zhang

Research output: Chapter in Book/Report/Conference proceedingConference contribution

81 Scopus citations

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.

Original languageEnglish (US)
Title of host publication2010 Proceedings IEEE INFOCOM
DOIs
StatePublished - Jun 15 2010
EventIEEE INFOCOM 2010 - San Diego, CA, United States
Duration: Mar 14 2010Mar 19 2010

Publication series

NameProceedings - IEEE INFOCOM
ISSN (Print)0743-166X

Other

OtherIEEE INFOCOM 2010
CountryUnited States
CitySan Diego, CA
Period3/14/103/19/10

All Science Journal Classification (ASJC) codes

  • Computer Science(all)
  • Electrical and Electronic Engineering

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