Subsidization Competition: Vitalizing the Neutral Internet Richard - PowerPoint PPT Presentation

Subsidization Competition: Vitalizing the Neutral Internet Richard T. B. Ma School of Computing National University of Singapore WIE 2014

Internet’s two -sided market  Problem is not in the transit market  Fiber optics backbone, rare congestion  Competitive market with declining prices  CPs bypass Tier-1 ISPs to improve performance  But in the mobile access market  High mobile infrastructure costs  One-side pricing from end-users  Lower profit margin than those of the CPs  Few incentives for investments

About this work  P ropose and study “subsidization competition”  CPs could voluntarily subsidize its users’ usage costs  Differences to sponsored data plan/”zero rate” Partial subsidization is allowed 1. ISPs charge the same per-unit rate, regardless the 2. source of revenue (no secret deals with CPs)

Basic system model 𝒏, 𝜈  Focus on an access ISP with capacity 𝜈 and a set 𝒪 of CPs. For each 𝑗 ∈ 𝒪 , denote  𝑛 𝑗 : user size, 𝜇 𝑗 : avg per user throughput  𝜄 𝑗 ≜ 𝑛 𝑗 𝜇 𝑗 as throughput and 𝜄 ≜ 𝜄 𝑗 𝑗∈𝒪  Define 𝜚 ≜ Φ 𝜄, 𝜈 as the system utilization  Φ 𝜄, 𝜈 ↗ 𝜄; Φ 𝜄, 𝜈 ↘ 𝜈  can be seen as system congestion  User throughput satisfies 𝜇 𝑗 ≜ 𝜇 𝑗 𝜚 ↘ 𝜚

Basic system model 𝒏, 𝜈  𝜚 is the utilization of a system 𝒏, 𝜈 iff , 𝜈 𝜚 = Φ 𝑛 𝑗 𝜇 𝑗 𝜚 𝑗∈𝒪  utilization is unique  throughput of CPs

One-sided pricing model  If ISP charges 𝑞 , its revenue is 𝑆 ≜ 𝑞𝜄  User size: 𝑛 𝑗 ≜ 𝑛 𝑗 𝑞 ↘ 𝑞

One-sided pricing model  Price effect: 𝜖𝜚 𝜖𝑞 ≤ 0; 𝜖𝜄 𝜖𝑞 ≤ 0.  CP 𝑗 ’s throughput 𝜄 𝑗 increases with price 𝑞 iff 𝜇 𝑗 < −𝜗 𝑞 𝑛 𝑗 /𝜗 𝜚 𝜚 𝜗 𝑞 𝑧 ≜ 𝜖𝑧 𝑦 where 𝜗 𝑦 𝑧 denotes the x-elasticity of y. 𝜖𝑦 𝑛 𝑗 small: users are not price sensitive  𝜗 𝑞 𝜇 𝑗 large: traffic is very sensitive to congestion  𝜗 𝜚

Subsidization model  Denote 𝑟 as a policy that limits the subsidy, each CP 𝑗 choose to subsidize 𝑡 𝑗 ∈ 0, 𝑟  Denote 𝒕 as the strategy profile of the CPs  User size becomes 𝑛 𝑗 = 𝑛 𝑗 𝑢 𝑗 = 𝑛 𝑗 𝑞 − 𝑡 𝑗  CP’s utility becomes 𝑉 𝑗 = 𝑤 𝑗 − 𝑡 𝑗 𝜄 𝑗  Define social welfare 𝑋 = 𝑤 𝑗 𝜄 𝑗 𝑗∈𝒪

Subsidization model

Nash equilibrium  For price 𝑞 and policy 𝑟 , a strategy profile 𝒕 is a Nash equilibrium iff each 𝑡 𝑗 solves 𝑁𝑏𝑦 𝑉 𝑗 𝑡 𝑗 ; 𝒕 −𝑗 = 𝑤 𝑗 − 𝑡 𝑗 𝜄 𝑗 𝒕 𝑡. 𝑢. 0 ≤ 𝑡 𝑗 ≤ 𝑟.  There exists a unique Nash equilibrium if for any 𝑡 ′ ≠ 𝑡 , there always exist CP 𝑗 such that ′ − 𝑡 𝑗 < 0 𝑡 𝑗 𝑣 𝑗 𝒕′ − 𝑣 𝑗 𝒕 where 𝑣 𝑗 = 𝜖𝑉 𝑗 𝒕 /𝜖𝑡 𝑗 defines the marginal utility.

Dynamics of equilibrium  If a CP 𝑗 ’s profitability increases unilaterally ′ ≥ 𝑡 𝑗 . from 𝑤 𝑗 to 𝑤 𝑗 ′ , under Nash equilibrium, 𝑡 𝑗  Dynamics of the Nash equilibrium: 𝑗𝑔 𝑡 𝑗 = 0 0 𝜖s 𝑗 𝜖𝑟 = 1 𝑗𝑔 𝑡 𝑗 = 𝑟 ⋯ 𝑝𝑢ℎ𝑓𝑠𝑥𝑗𝑡𝑓 𝜖s 𝑗 𝜖𝑞 = 0 𝑗𝑔 𝑡 𝑗 = 0 𝑝𝑠 𝑡 𝑗 = 𝑟 ⋯ 𝑝𝑢ℎ𝑓𝑠𝑥𝑗𝑡𝑓

Policy implications  Result: Under fixed price 𝑞 , if marginal utility matrix is off-diagonally monotone, 𝜖𝜚 𝜖𝑆 𝜖𝑟 ≥ 0 𝑏𝑜𝑒 𝜖𝑡 𝑗 𝜖𝑟 ≥ 0 ∀𝑗 ∈ 𝒪 𝜖𝑟 ≥ 0,  Deregulation incentivize CPs to subsidize, increase system utilization and ISP revenue  Implications: deregulation is desirable for improving investment incentives for ISPs

Policy under ISP’s optimal price  Consider a 3-stage game: Regulator chooses policy 𝑟 1. ISP chooses optimal price 𝑞 𝑟 2. CPs choose subsidies 𝒕 3. 𝑒𝑛 𝑗 𝑒𝜚 𝑒𝜇 𝑗  Policy effect: 𝑒𝑟 = ⋯ 𝑒𝑟 = ⋯ , 𝑒𝑟 = ⋯ ,  CP 𝑗 ’s 𝜄 𝑗 decreases with relaxed policy 𝑟 iff 𝜇 𝑗 = 𝜗 𝑟 𝜇 𝑗 > −𝜗 𝑟 𝑛 𝑗 𝜗 𝑟 𝑢 𝑗 /𝜗 𝜚 𝑛 𝑗 / 𝜗 𝜚 𝜚 𝜗 𝑢 𝑗 𝑛 𝑗 small: users are not price sensitive  𝜗 𝑢 𝑗 𝜇 𝑗 large: traffic is sensitive to congestion  𝜗 𝜚 𝑢 𝑗 small: CP is less profitable  𝜗 𝑟

Revenue and social welfare  Relaxed policy induces higher 𝑆 and 𝑋  Price regulation might be needed

Conclusions  Study subsidization competition among CPs,  ISP uses the same per-unit charge  Partial subsidy is allowed  Properties  the network is physically neutral  it creates a feedback loop for CPs to compete  increase access revenue and attract investment  Caveats  Utilization will increase, some CPs have lower rates  ISP’s price might need to be regulated if the market is not competitive enough

FCC Open Internet Order  Transparency  must disclose network management practices, performance characteristics, and …  No blocking  may not block lawful content, applications, services, non- harmful devices …  No unreasonable discrimination  may not unreasonably discriminate in transmitting lawful network traffic …

How do we want to regulate?  It is about “no unreasonable discrimination”  Existing solution  impose an absolute minimum requirement for ordinary class  however, ISPs have different capacities …  Our proposal  restrict the maximum gap in service quality  implication: if you make premium class better, you need to make ordinary class better too.

References  Richard T. B. Ma. “Subsidization Competition: Vitalizing the Neutral Internet .” ACM CoNEXT Conference 2014  Jing Tang and Richard T. B. Ma. “Regulating Monopolistic ISPs Without Neutrality.” IEEE ICNP Conference, 2014.