Section: New Results

Network Economics

Participant : Bruno Tuffin.

The general field of network economics, analyzing the relationships between all actors of the digital economy, has been an important subject for years in the team.

A new book on the subject. We have published a book on this broad topic [61] . Presenting a balance of theory and practice, this up-to-date guide provides a comprehensive overview of the key issues in telecommunication network economics, as well as the mathematical models behind the solutions. These mathematical foundations enable the reader to understand the economic issues arising at this pivotal time in network economics, from business, research, and political perspectives. This is followed by a unique practical guide to current topics, including app stores, volume-based pricing, auctions for advertisements, search engine business models, the network neutrality debate, the relationship between mobile network operators and mobile virtual network operators, and the economics of security. The guide discusses all types of players in telecommunications, from users, to access and transit network providers; to service providers (including search engines, cloud providers or content delivery networks); to content providers, and regulatory bodies. The book is designed for graduate students, researchers, and industry practitioners working in telecommunications.

Research contributions in network economics during 2013 can be decomposed into the application of auction theory, cognitive networks, and network/search neutrality analysis.

Auction theory. In the next generation Internet, we have seen the convergence of multimedia services and Internet with the mobility of users. Vertical handover decision (VHD) algorithms are essential components of the mobility management architecture in mobile wireless networks. VHD algorithms help mobile users to choose the best mobile network to connect among available candidates. It also can help the network manager to optimize easily the limited resources shared among the network providers and the users. In [26] , we formulate VHD algorithm as a resource allocation problem for down-link transmission power in multiple W-CDMA networks and show how combinatorial double-sided auctions can be applied to this specific problem. The proposed pricing schemes make use of the signal interference to noise ratio (SINR), achievable data rates, power allocation at mobile networks, and monetary cost as decision criteria, and our model differentiates new calls and on-going communications to take into account that the last category has somewhat more importance. Several combinatorial double-sided auction are proposed to maximize the social welfare and /or to provide incentives for mobile users and mobile operators to be truth-telling in terms of valuation or cost. Finally, the economic properties of the different proposed pricing schemes are also studied by means of simulations.

Cognitive networks. Cognitive radio technologies for spectrum sharing have received an enormous interest from the research community for the last decade, and more recently from regulators and mobile operators. We have studied a cognitive radio network in [47] where primary operator and an entrant secondary operator compete for users. The system is modeled using queueing and game theories. The economic viability of supporting the secondary operator service using an opportunistic access to the spectrum owned by the primary operator is assessed. Against the benchmark of the primary operator operating as a monopolist, we show that the entry of the secondary operator is desirable from an efficiency perspective, since the carried traffic increases. For a range of parameter values, a lump sum payment can be designed so that the incumbent operator has an incentive to let the secondary operator enter. Additionally, the opportunistic access setting has been compared against a leasing-based alternative, and we have concluded that the former outperforms the latter in terms of efficiency and incentive.

Network/search neutrality analysis. Network neutrality is the topic of a vivid and very sensitive debate, in both the telecommunication and political worlds, because of its potential impact in everyday life. That debate has been raised by Internet Service Providers (ISPs), complaining that content providers (CPs) congest the network with insufficient monetary compensation, and threatening to impose side payments to CPs in order to support their infrastructure costs. While there have been many studies discussing the advantages and drawbacks of neutrality, there is no game-theoretical work dealing with the observable situation of competitive ISPs in front of a (quasi-)monopolistic CP. However, this is a typical situation that is condemned by ISPs, and, according to them, another reason of the non-neutrality need. We develop and analyze in [23] a model describing the relations between two competitive ISPs and a single CP, played as a three-level game corresponding to three different time scales. At the largest time scale, side payments (if any) are determined. At a smaller time scale, ISPs decide their (flat-rate) subscription fee (toward users), then the CP chooses the (flat-rate) price to charge users. Users finally select their ISP (if any) using a price-based discrete choice model, and decide whether to also subscribe to the CP service. The game is analyzed by backward induction. As a conclusion, we obtain among other things that non-neutrality may be beneficial to the CP, and not necessarily to ISPs, unless the side payments are decided by ISPs.

The very related recently raised search neutrality debate questions the ranking methods implemented by search engines: when a search is performed, do they (or should they) display the web pages ordered according to the quality-of-experience (relevance) of the content? In [68] , we analyze that question in a setting when content is offered for free, content providers making revenue through advertising. For content providers, determining the amount of advertising to add to their content is a crucial strategic decision. Modeling the trade-off between the revenue per visit and the attractiveness, we investigate the interactions among competing content providers as a non-cooperative game, and consider the equilibrium situations to compare the different ranking policies. Our results indicate that when the search engine is not involved with any high-quality content provider, then it is in its best interest to implement a neutral ranking, which also maximizes user perceived quality-of-experience and favors innovation. On the other hand, if the search engine controls some high-quality content, then favoring it in its ranking and adding more advertisement yields a larger revenue. This is not necessarily at the expense of user perceived quality, but drastically reduces the advertising revenues of the other content providers, hence reducing their chances to innovate.