Bill-and-Keep peering

Peering arrangements between Internet Service Providers (ISPs), in which providers agree to carry traffic originating from a peer, are common in the Internet. A common contractual peering agreement between smaller ISPs is “Bill-and-Keep”, where no money changes hands between the peers. This paper first investigates a situation when ISPs who have access to a transit ISP capable of handling their traffic for a fee, decide to peer incurring some fixed peering cost. Using a simple model it is shown that Bill-and-Keep peering is the fair and efficient outcome if the transit ISP charges for both inbound and outbound traffic and transit charges as well as costs of peering are symmetric. Next, complementarity between providers at the operational level, as measured by improvement in quality of service (QoS), is analyzed using an idealized model. Assuming that each provider incurs costs, or degradation in QoS, from its traffic traversing its own as well as the peer's links and chooses the amount of traffic to send on its peers’ links in its self-interest, the Nash equilibria of the resulting one shot game and then of an infinitely repeated game are analyzed. For the one-shot game, it is established that, while it is not possible for all the providers to be worse off, it is certainly possible for all of them to be better off. An intuitive sufficient condition for each of the providers to be better off in Nash equilibrium is then derived. Further, it is shown that providers that are better off in the one-shot game can cooperate using threat strategies in an infinitely repeated game and can each be even better off. Coalition formation between peers as a dynamic process is also investigated and some examples and conjectures on some preliminary findings are provided. Finally, the policy implications of the findings are discussed.     

Energy advice service as perceived by Swedish homeowners

External actors can influence potential adopters to adopt energy efficiency measures. In Sweden municipality energy advisers are one such actor group who provides energy advice and information to the end users. The success of energy advice service for improvement of energy efficiency of detached houses depends on homeowners' perception towards it. In this context, we conducted a national survey of about 3000 owners of detached houses through stratified random sampling method in the summer of 2008. We found that majority of owners of detached houses consider energy advisers as an important source of information. Furthermore, many homeowners who contacted energy advisers for advice had implemented the suggestions. However, only a few homeowners had contacted an energy adviser. Our findings suggest that it is beneficial to continue the energy advice service, but more efforts are needed to increase homeowners' awareness of and satisfaction with such services.     

Surplus extraction by network providers: Implications for net neutrality and innovation

This paper looks at surplus extraction by network providers who control the medium of information transfer between application developers and consumers, and addresses the following questions: is net neutrality beneficial to society? and does providing network providers flexibility in pricing stunt innovation in the long run? To answer the first question, it looks at a market consisting of a monopoly network provider and two application providers with non-substitutable products, using a simple single period model. It shows that net neutrality is necessary to ensure maximal benefit to the society. To answer the second question, the paper shows that a monopoly network provider, if allowed complete flexibility in pricing, does not necessarily stunt innovation. Looking at a market that consists of one network provider and one application provider, and using a simple multi-period model, it shows that given maximum flexibility the network provider not only encourages innovation when the potential benefits are sufficiently high but also maximizes surplus. This paper takes the view that the topic of net neutrality is not only controversial but also complicated, and suggests that policy makers use a balanced approach based on sound analysis.     

Competitive resource sharing by Internet Service Providers

We look at non-cooperative resource sharing (a generalization of paid peering) among Internet Service Providers (ISPs), where individually rational providers who not only compete for customers but also participate in resource sharing, in order to utilize underlying complementarities in cost structures. In particular, we are interested in the following question: would simple, easy-to-implement access pricing mechanisms guarantee ex-ante participation in resource sharing even by providers who, subsequent to deciding participation, engage in competition for customers, set access prices and make routing decisions? We first show that, in presence of linear access pricing, participation in the sharing arrangement is possible, but not guaranteed. We then show that a two-part tariff guarantees participation in the sharing agreement—this is not obvious given that resource sharing alters customer bases. We also show that our mechanism is robust to providers mis-reporting their types. Next, we show that, though both providers choose strictly positive customer bases, one of the them has no incentive to utilize the resources of the other and effectively acts as a resource supplier, whereas the other provider utilizes both resources. Finally, we show the robustness of our results to different cost structure and game forms, and provide some policy implications. Our results have significant implications not only for policy design since they suggest that paid peering should be encouraged but also for design of realistic traffic engineering protocols.