Evaluating the effect of Network Neutrality on content provider - - PowerPoint PPT Presentation

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Evaluating the effect of Network Neutrality on content provider - - PowerPoint PPT Presentation

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Evaluating the effect of Network Neutrality on content provider business models Maurizio Naldi, Giuseppe DAcquisto, Bruno Tuffin, Patrick Maill e ARC MENEUR meeting, Paris, May 2011 M. Naldi, G. DAcquisto, B. Tuffin, P. Maill e

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Evaluating the effect of Network Neutrality on content provider business models

Maurizio Naldi, Giuseppe D’Acquisto, Bruno Tuffin, Patrick Maill´ e ARC MENEUR meeting, Paris, May 2011

  • M. Naldi, G. D’Acquisto, B. Tuffin, P. Maill´

e (2011) Modelling Net Neutrality MENEUR meeting, May 2011 1 / 6

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Objectives

Consider a competitive context involving content providers in

  • competition. Some providers offer content for free, while others offer

pay-per-use content.

  • M. Naldi, G. D’Acquisto, B. Tuffin, P. Maill´

e (2011) Modelling Net Neutrality MENEUR meeting, May 2011 2 / 6

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SLIDE 3

Objectives

Consider a competitive context involving content providers in

  • competition. Some providers offer content for free, while others offer

pay-per-use content. Investigate the effect of network neutrality on the results of that competition

  • M. Naldi, G. D’Acquisto, B. Tuffin, P. Maill´

e (2011) Modelling Net Neutrality MENEUR meeting, May 2011 2 / 6

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SLIDE 4

Objectives

Consider a competitive context involving content providers in

  • competition. Some providers offer content for free, while others offer

pay-per-use content. Investigate the effect of network neutrality on the results of that competition Does network neutrality favor pay-per-use, or other business models?

  • M. Naldi, G. D’Acquisto, B. Tuffin, P. Maill´

e (2011) Modelling Net Neutrality MENEUR meeting, May 2011 2 / 6

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SLIDE 5

Objectives

Consider a competitive context involving content providers in

  • competition. Some providers offer content for free, while others offer

pay-per-use content. Investigate the effect of network neutrality on the results of that competition Does network neutrality favor pay-per-use, or other business models? Also, this can have consequences in terms of incentives for content creation.

  • M. Naldi, G. D’Acquisto, B. Tuffin, P. Maill´

e (2011) Modelling Net Neutrality MENEUR meeting, May 2011 2 / 6

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The model

  • M. Naldi, G. D’Acquisto, B. Tuffin, P. Maill´

e (2011) Modelling Net Neutrality MENEUR meeting, May 2011 3 / 6

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The model

F P The actors: 2 content providers:

  • ne (F) offering free content,

the other (P) pay-per-use content

  • M. Naldi, G. D’Acquisto, B. Tuffin, P. Maill´

e (2011) Modelling Net Neutrality MENEUR meeting, May 2011 3 / 6

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The model

F P N The actors: One network (access) provider

  • M. Naldi, G. D’Acquisto, B. Tuffin, P. Maill´

e (2011) Modelling Net Neutrality MENEUR meeting, May 2011 3 / 6

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The model

F P N U The actors: Users willing to access content

  • M. Naldi, G. D’Acquisto, B. Tuffin, P. Maill´

e (2011) Modelling Net Neutrality MENEUR meeting, May 2011 3 / 6

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The model

F P N U The money flows:

  • M. Naldi, G. D’Acquisto, B. Tuffin, P. Maill´

e (2011) Modelling Net Neutrality MENEUR meeting, May 2011 3 / 6

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The model

vF F vP P N U The money flows: Content providers benefit from advertising...

  • M. Naldi, G. D’Acquisto, B. Tuffin, P. Maill´

e (2011) Modelling Net Neutrality MENEUR meeting, May 2011 3 / 6

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The model

vF F vP P N U pS The money flows: ... and possibly by charging users for content

  • M. Naldi, G. D’Acquisto, B. Tuffin, P. Maill´

e (2011) Modelling Net Neutrality MENEUR meeting, May 2011 3 / 6

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The model

vF F vP P N tF tP U pS The money flows: Content providers have to pay to the ISP

  • M. Naldi, G. D’Acquisto, B. Tuffin, P. Maill´

e (2011) Modelling Net Neutrality MENEUR meeting, May 2011 3 / 6

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The model

vF F vP P N tF tP U a pS The money flows: Users pay a fixed fee...

  • M. Naldi, G. D’Acquisto, B. Tuffin, P. Maill´

e (2011) Modelling Net Neutrality MENEUR meeting, May 2011 3 / 6

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The model

vF F vP P N tF tP U a pN pS The money flows: ... and a volume-based fee

  • M. Naldi, G. D’Acquisto, B. Tuffin, P. Maill´

e (2011) Modelling Net Neutrality MENEUR meeting, May 2011 3 / 6

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How the game takes place

We model those interactions as a multi-stage game Lower-lever game (shortest time scale): users decide on their demand level on each content provider.

  • M. Naldi, G. D’Acquisto, B. Tuffin, P. Maill´

e (2011) Modelling Net Neutrality MENEUR meeting, May 2011 4 / 6

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How the game takes place

We model those interactions as a multi-stage game Lower-lever game (shortest time scale): users decide on their demand level on each content provider. We assume a linear demand, of the form DP = D0P max[1 − α(pS + pN) + βpN, 0] DF = D0F max[1 − ˆ αpN + ˆ β(pS + pN), 0]

  • M. Naldi, G. D’Acquisto, B. Tuffin, P. Maill´

e (2011) Modelling Net Neutrality MENEUR meeting, May 2011 4 / 6

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How the game takes place

We model those interactions as a multi-stage game Lower-lever game (shortest time scale): users decide on their demand level on each content provider. Intermediate level: Network provider and pay-per-use content provider play a pricing game

  • M. Naldi, G. D’Acquisto, B. Tuffin, P. Maill´

e (2011) Modelling Net Neutrality MENEUR meeting, May 2011 4 / 6

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How the game takes place

We model those interactions as a multi-stage game Lower-lever game (shortest time scale): users decide on their demand level on each content provider. Intermediate level: Network provider and pay-per-use content provider play a pricing game ΠP = (pS + vP − tP − sP)DP ΠN = a − k

  • OPEX

+pN(DF + DP) + (tP − nP

  • OPEX

)DP + (tF − nF

  • OPEX

)DF.

  • M. Naldi, G. D’Acquisto, B. Tuffin, P. Maill´

e (2011) Modelling Net Neutrality MENEUR meeting, May 2011 4 / 6

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How the game takes place

We model those interactions as a multi-stage game Lower-lever game (shortest time scale): users decide on their demand level on each content provider. Intermediate level: Network provider and pay-per-use content provider play a pricing game Higher level: Payments tP and tF from content providers to the network provider are determined

  • M. Naldi, G. D’Acquisto, B. Tuffin, P. Maill´

e (2011) Modelling Net Neutrality MENEUR meeting, May 2011 4 / 6

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SLIDE 21

How the game takes place

We model those interactions as a multi-stage game Lower-lever game (shortest time scale): users decide on their demand level on each content provider. Intermediate level: Network provider and pay-per-use content provider play a pricing game Higher level: Payments tP and tF from content providers to the network provider are determined Four possibilities

◮ Objective ⋆ maximize Network provider revenue ⋆ maximize social welfare ◮ Situation with respect to Network Neutrality, where here

neutrality means tF = tP

  • M. Naldi, G. D’Acquisto, B. Tuffin, P. Maill´

e (2011) Modelling Net Neutrality MENEUR meeting, May 2011 4 / 6

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SLIDE 22

How the game takes place

We model those interactions as a multi-stage game Lower-lever game (shortest time scale): users decide on their demand level on each content provider. Intermediate level: Network provider and pay-per-use content provider play a pricing game Higher level: Payments tP and tF from content providers to the network provider are determined Highest level: a regulator may limit the amount of available free content

  • M. Naldi, G. D’Acquisto, B. Tuffin, P. Maill´

e (2011) Modelling Net Neutrality MENEUR meeting, May 2011 4 / 6

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SLIDE 23

How the game takes place

We model those interactions as a multi-stage game Lower-lever game (shortest time scale): users decide on their demand level on each content provider. Intermediate level: Network provider and pay-per-use content provider play a pricing game Higher level: Payments tP and tF from content providers to the network provider are determined Highest level: a regulator may limit the amount of available free content Game studied by backward induction

  • M. Naldi, G. D’Acquisto, B. Tuffin, P. Maill´

e (2011) Modelling Net Neutrality MENEUR meeting, May 2011 4 / 6

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Pricing game among content providers

Best-reply strategy of the content provider P: BRP(pN) = max

  • 0, 1 + (β − α)pN − α(vp − tP − sP)

2α

  • .

Best-reply strategy of the Network Provider can be computed (5 cases to distinguish)

  • M. Naldi, G. D’Acquisto, B. Tuffin, P. Maill´

e (2011) Modelling Net Neutrality MENEUR meeting, May 2011 5 / 6

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SLIDE 25

Pricing game among content providers

Best-reply strategy of the content provider P: BRP(pN) = max

  • 0, 1 + (β − α)pN − α(vp − tP − sP)

2α

  • .

Best-reply strategy of the Network Provider can be computed (5 cases to distinguish) analytically heavy, turn to numerical analysis

  • M. Naldi, G. D’Acquisto, B. Tuffin, P. Maill´

e (2011) Modelling Net Neutrality MENEUR meeting, May 2011 5 / 6

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Setting the parameter values

Values provided by G. D’Acquisto and M. Naldi Demand max. levels: D0F = 50GB/month (per user) D0P = 30GB/month (per user) Fixed user fee a = 20 e/month OPEX:        k = 5e/month (per user, cost of providing access) nF = nP = 0.1e/ GB/month (transport costs, supported by the network) sP = 0.2e/GB/month (unit cost of the content for P) Advertising revenues vF = 0.75e/GB/month vP = 0.25e/GB/month

  • M. Naldi, G. D’Acquisto, B. Tuffin, P. Maill´

e (2011) Modelling Net Neutrality MENEUR meeting, May 2011 6 / 6