Section: New Results

Network Economics

Participants: Bruno Tuffin, Patrick Maillé, Pierre L'Ecuyer

The general field of network economics, analyzing the relationships between all acts of the digital economy, has been an important subject for years in the team. The whole problem of network economics, from theory to practice, describing all issues and challenges, is described in our book [7].

Roaming. In October 2015, the European parliament has decided to forbid roaming charges among EU mobile phone users, starting June 2017, as a first step toward the unification of the European digital market. We have investigated the consequences of such a measure from an economic perspective. In [47], we analyze the effect of the willingness-to-pay heterogeneity among users (also due to wealth heterogeneity), and the fact that the roaming behavior is positively correlated with wealth. Our analysis suggests that imposing free roaming degrades the revenues of the operator but can also deter some users from subscribing; hence we conclude that such (apparently beneficial) regulatory decisions must be taken with care. In [47], we particularly focus on the strategies on transit payments between ISPs in different countries. We highlight that scrutiny is also required since, depending on parameters, consumer surplus or subscription penetration are not necessarily maximized if free roaming is enforced.

Network neutrality. Most of our activity has been devoted to the vivid network neutrality debate, going beyond the traditional for or against neutrality, and trying to tackle it from different angles.

Network neutrality has been a very sensitive topic of discussion all over the world. In the keynote talk [59], we first introduce the elements of the debate and how the problem can be modeled and analyzed through game theory. With an Internet ecosystem much more complex now than the simple delivery chain Content-ISP-User, we highlight, in a second step, how neutrality principles can be bypassed in various ways without violating the rules currently evoked in the debate, for example via Content Delivery Networks (CDNs), or via search engines which can affect the visibility and accessibility of content. We describe some other grey zones requiring to be dealt with and spend some time on discussing the (potential) implications for clouds.

The impact of CDNs on the debate has been detailed in [18]. Content Delivery Networks (CDN) have become key telecommunication actors. They contribute to improve significantly the quality of services delivering content to end users. However, their impact on the ecosystem raises concerns about their fairness, and therefore the question of their inclusion in the neutrality debates becomes relevant. We analyze the impact of a revenue-maximizing CDN on some other major actors, namely, the end-users, the network operators and the content providers, at comparing the outcome with that of a fair behavior, and at providing tools to investigate whether some regulation should be introduced.We present a mathematical model and show that there exists a unique optimal revenue-maximizing policy for a CDN actor, in terms of dimensioning and allocation of its storage capacity, and depending on parameters such as prices for service/transport/storage. Numerical experiments are then performed with both synthetic data and real traces obtained from a major Video-on-Demand provider. In addition, using the real traces, we compare the revenue-based policy with policies based on several fairness criteria.

Network neutrality is often advocated by content providers, stressing that side payments to Internet Service Providers would hinder innovation. However, we also observe some content providers actually paying those fees. In [24], we intend to explain such behaviors through economic modeling, illustrating how side payments can be a way for an incumbent content provider to prevent new competitors from entering the market. We investigate the conditions under which the incumbent can benefit from such a barrier-to-entry, and the consequences of that strategic behavior on the other actors: content providers, users, and the Internet Service Provider. We also describe how the Nash bargaining solution concept can be used to determine the side payment.

Similarly, major content/service providers are publishing grades they give to ISPs about the quality of delivery of their content. The goal is to inform customers about the “best” ISPs. But this could be an incentive for, or even a pressure on, ISPs to differentiate service and provide a better quality to those big content providers in order to be more attractive. Instead of the traditional vision of ISPs pressing content providers, we face here the opposite situation, still possibly at the expense of small content providers though. We design in [48] a model describing the various actors and their strategies, analyzes it using non-cooperative game theory tools, and quantifies the impact of those advertised grades with respect to the situation where no grade is published. We illustrate that a non-neutral behavior, differentiating traffic, is not leading to a desirable situation.

Sponsored data. With wireless sponsored data, a third party, content or service provider, can pay for some of your data traffic so that it is not counted in your plan's monthly cap. This type of behavior is currently under scrutiny, with telecommunication regulators wondering if it could be applied to prevent competitors from entering the market, and what the impact on all telecommunication actors can be. To answer those questions, we design and analyze in [69] a model where a Content Provider (CP) can choose the proportion of data to sponsor and a level of advertisement to get a return on investment, and several Internet Service Providers (ISPs) in competition. We distinguish three scenarios: no sponsoring, the same sponsoring to all users, and a different sponsoring depending on the ISP you have subscribed to. This last possibility may particularly be considered an infringement of the network neutrality principle. We see that sponsoring can be beneficial to users and ISPs, especially with identical sponsoring. We also discuss the impact of zero-rating where an ISP offers free data to a CP to attract more customers, of and vertical integration where a CP and an ISP are the same company.

Online platforms and search engines. The search neutrality debate is about whether search engines should or should not be allowed to uprank certain results among the organic content matching a query. This debate is related to that of network neutrality, which focuses on whether all bytes being transmitted through the Internet should be treated equally. In a previous paper, we had formulated a model that formalizes this question and characterized an optimal ranking policy for a search engine. The model relies on the trade-off between short-term revenues, captured by the benefits of highly-paying results, and long-term revenues which can increase by providing users with more relevant results to minimize churn. In [21], we apply that model to investigate the relations between search neutrality and innovation. We illustrate through a simple setting and computer simulations that a revenue-maximizing search engine may indeed deter innovation at the content level. Our simple setting obviously simplifies reality, but this has the advantage of providing better insights on how optimization by some actors impacts other actors.

Sponsored auctions. Advertisement in dedicated webpage spaces or in search engines sponsored slots is usually sold using auctions, with a payment rule that is either per impression or per click. But advertisers can be both sensitive to being viewed (brand awareness effect) and being clicked (conversion into sales). In [23], we generalize the auction mechanism by including both pricing components: the advertisers are charged when their ad is displayed, and pay an additional price if the ad is clicked. Applying the results for Vickrey-Clarke-Groves (VCG) auctions, we show how to compute payments to ensure incentive compatibility from advertisers as well as maximize the total value extracted from the advertisement slot(s). We provide tight upper bounds for the loss of efficiency due to applying only pay-per-click (or pay-per-view) pricing instead of our scheme. Those bounds depend on the joint distribution of advertisement visibility and population likelihood to click on ads, and can help identify situations where our mechanism yields significant improvements. We also describe how the commonly used generalized second price (GSP) auction can be extended to this context.