On Cooperative Settlement Between Content, Transit and Eyeball ISPs

Richard T.B. Ma

Columbia University

Dah-ming Chiu, John C.S. Lui

The Chinese University of Hong Kong

Vishal Misra, Dan Rubenstein

Columbia University

Outline

• Current ISP Settlement Problems

• ISP Models

• Profit Sharing Among ISPs

• Implications

A view of Internet Service Providers (ISPs)

• The Internet is composed of Autonomous Systems (ASes).

• An ISP is a business entity.– Might comprise multiple ASes.– Provide Internet access.

– Objective: maximize profits.

ISP

• Eyeball ISPs– Provide Internet access to customers:– Place Large investment in infrastructure.– E.g. AT&T, Verizon …

• Content ISPs– Provide contents via the Internet.– Serve customers like:

• Transit ISPs– Tier 1 ISPs: global connectivity of the Internet.– Provide transit services for other ISPs.– Cover a large geographic area.

Different classes of ISPs

Current ISP settlements

Zero-Dollar Peering Settlement

Customer-Provider Settlement

Transit ISP Transit ISP

Content ISP Eyeball ISP

Transit ISP

ISP positions on current settlement

Not enough revenue to recover investments.Other ISPs are free-riding on our facilities.

Home-users’ monthly fees do not cover costs.We should be able to generate more revenue.

Transit

Eyeball

Content Providers We have paid our fair share for transit and delivery and buy bandwidth from ISPs.

Yes No

Net Neutrality Debate: Provide Content-based Service Differentiation ?

Network Balkanization: De-peering between ISPs

Level 3 Cogent

Issues of the current ISP settlements

How to appropriately share profits amongst ISPs?

Transit Eyeball

Transit Transitzero-dollar peering

Content Providers

Contribution of this work

• Modeling of ISPs– How the revenues are generated– How different kinds of ISPs interact with one another

• Profit Sharing Solution Among ISPs– Efficiency– Fairness– Uniqueness

• Implications on Bilateral Settlements– Why the current settlements failed– What kind of new settlements should emerge

The Network Model: Eyeball Side

• Geographic Regions (r)

• Per Customer Monthly Charge (r)

• Customer Size (Xr)

• Eyeball ISP (Bj)

• Revenue from a region r (rXr)

$

US

UK

₤

X$

X₤

$ X$+₤ X₤

B1

B2

B2

B3

r=$

r= ￡

Eyeball Side Demand Assumption

• Elastic intra-region demand – Customers can switch among ISPs

within a region.– New eyeballs may take customers from

other eyeballs in the same region.– Customers move to other eyeballs when

the original eyeball leaves the system.

• Inelastic inter-region demand– Customers cannot switch to ISPs in

other regions.– Constant customer size in a region.

B1

US

B2

B3

UK

B3

X$

X₤

The Network Model: Content Side

X$

X₤

{♫, ♣}

$ X$+₤ X₤

• Content Items (q)

• Content ISP (Ci)

• Per Customer Revenue for content q (q)

• Content-side Revenue for uploading content q to region r (qXr)

C2

C1

C3♣

♫

(♫ +♣)(X$+X₤)

How to share profits amongst ISPs?

{♫}

{♣}

{♫,♣}

• One content and one eyeball ISP.

• One region, US, and one content, ♫.

• Egalitarian profit sharing:

X$

{♫}

C1 B1

US$ X$♫ X$

Profit generated: v=($+♫)X$

j(B )=j(C ) = v21

How to share profit? -- the baseline case

• Symmetry: symmetric eyeball ISPs get the same profit.• Efficiency: summation of all ISPs’ profit equals v.

• Fairness: same mutual contribution for any pair of ISPs.

X$

{♫}

C1

B1

US

$ X$♫ X$

B2

j(C ) - v = j(B ) - 021

j(C ) +2 j(B ) = v

j(C )= v32

61j(B )= v

How to share profit? -- multiple eyeballs

Unique solution (Shapley value)

Properties of Shapley Value

The Shapley Value

Efficiency Symmetry Fairness

Myerson 1977

Routing Incentive

Interconnecting Incentive

CoNEXT ‘07

Solution Stability

Shapley 1977

Efficiency Symmetry Dummy Additivity

Shapley 1953

Efficiency Symmetry Strong Monotonicity

Young 1985

• The unique solution (Shapley value) that satisfies Efficiency Symmetry and Fairness:

n eyeball ISPs.

j(B )= v, j(C ) = vn+1n

n(n+1)1

♫ X$

X$

{♫}

C1

B1

US

$ X$

B2

Bn

How to share profit? -- multiple eyeballs

{♫}

C1

B1

US

Bn-1

• The more eyeballs, the more profit the content ISP gets.– Elastic users move between eyeball ISPs.– Multiple eyeball ISPs provide redundancy; – The only content ISP has more leverage.

• When one eyeball leaves the system: • The marginal profit loss of the content ISP:

– If n=1, the content ISP loses everything if the eyeball leaves.

– The content ISP loses only 1/n2 of its original profit.

j(B )= v, j(C ) = vn+1n

n(n+1)1

Results and implications of profit sharing

Bn

nn-1j’ (C )= v

Dj(C )= v - v = - j(C )n+1n

nn-1 1

n2

C2

US

B1

C1

Cm

X$

$ X$

{♫}

{♫}

{♫}

♫ X$

m content ISPs.

j(C )= v, j(B ) = vm+1m

m(m+1)1

• The unique solution (Shapley value) that satisfies Efficiency Symmetry and Fairness:

How to share profit? -- multiple contents

• The more contents, the more profit the eyeball ISP gets.– Content can be obtained by any content ISP.

– Multiple content ISPs provide redundancy;

– The only eyeball ISP has more leverage.

• The marginal profit loss of the eyeball ISP:

– If m=1, the eyeball ISP loses everything if the content leaves.

– The eyeball ISP loses only 1/m2 of its original profit.

j(C )= v, j(B ) = vm+1m

m(m+1)1

Dj(B )= - j(B )1m2

C2

US

B1

C1

Cm

{♫}

{♫}

{♫}

Results and implications of profit sharing

C2

C1

Cm

{♫}

{♫}

{♫}

♫ X$X$

B1

US

$ X$

B2

Bn

• The unique solution (Shapley value) that satisfies Efficiency Symmetry and Fairness:

j(B )= v, j(C ) = vm(n+m)

nn(n+m)

m

Profit share -- multiple eyeballs and contents

• Intuition for elastic demand and supply– The more of the same kind provide redundancy.

– The less of a kind can obtain more leverage.

C2

C1

Cm

B1

B2

Bn

Results and implications of ISP profit sharing

• Each ISP’s profit is– Inversely proportional to the

number of ISPs of its type.

– Proportional to the number of ISPs of the opposite type.

j(B ) = , j(C ) = nm

(n+m)v n

m(n+m)v

Sm=1

m

Sk=1

k

n+m+kv ( )m

m ( )kk ( )n+m+k-1

m+kj(B )=

Sn=1

n

Sk=1

k

n+m+kv ( )n

n ( )kk ( )n+m+k-1

n+kj(C )=

Sm=1

m

Sn=1

n

n+m+kv ( )m

m ( )nn ( )n+m+k-1

m+nj(T )=

♫ X$ C2

C1

Cm

{♫}

{♫}

{♫}

X$

B1

US

$ X$

B2

Bn

T2

T1

Tk

Profit share -- eyeballs, transits and contents

Profit share -- eyeballs, transits and contents

Sm=1

m

Sk=1

k

n+m+kv ( )m

m ( )kk ( )n+m+k-1

m+kj(B )=

Sn=1

n

Sk=1

k

n+m+kv ( )n

n ( )kk ( )n+m+k-1

n+kj(C )=

Sm=1

m

Sn=1

n

n+m+kv ( )m

m ( )nn ( )n+m+k-1

m+nj(T )=

• Intuition– The more of the same kind provide redundancy.

– The less of a kind can obtain more leverage.

• Revenue sources are separable – Eyeball-side components:

– Content-side components:

Profit share -- multiple regions and items

$ X$ ₤ X₤

♫X$ ♣X$ ♫X₤ ♣X₤

B2X$

B1

US

$ X$

C2

C1

{♫}

UK

X₤

₤ X₤

{♣}

C2 B3

T2

T1

T3

{♫,♣}

(♫ +♣)(X$+X₤)

• A specific revenue component is shared by– Content ISPs that provide the item

– Eyeball ISPs that generate the revenue

– Transit ISPs that help the delivery

Profit share -- multiple regions and items

B2X$

B1

US

$ X$

C2

C1

{♫}

UK

X₤

₤ X₤

{♣}

C2 B3

T2

T1

T3

{♫,♣}

(♫ +♣)(X$+X₤)

♣X$

Profit share – general topologies

v = ♫ X$

B2 X$

B1

US

C1

{♫}T1

ji(N, v) = [S ji(N \{j}, v) + v(N )1{i is veto}]j≠i|N |

1

jC1(N, v) = [0 + v + v + v] = v41

31

31

125

Dynamic Programming Procedure!

jC1 = 0

B2

B1

C1 T1

jC1 = 1/3v

B2

B1

C1 T1

jC1 = 1/3v

B2

B1

C1 T1

C1 is Veto.

B2

B1

C1 T1

T1

T2

T3

T4

C2

C1

C3

B2

B3

B1

B2

CB

T

Implications – the value chain

$ $$

$ $

$ $

$$

$ $$

$

$

$$ $$

CRBR

T1

T2

T3

T4

C2

C1

C3

B2

B3

B1

B2

CB

T

Implications – the value chain

• Revenue Flows– Content-side revenue (CR): Content Transit Eyeball

– Eyeball-side revenue (ER): Eyeball Transit Content

$ $$

$ $$

$ $$

$$$

CRBR

T1

T2

T3

T4

C2

C1

C3

B2

B3

B1

B2

CB

T

Implications – equivalent bilateral settlements

$ $$

$ $$

$ $$

$$$

CRBR

• When CR ≈ BR, bilateral implementations:– Customer/Provider: Contents & Eyeballs are customers.

– Zero-dollar Peering: Transit ISPs peer with each other.

– Stable structure for homogenous local ISPs 10 years ago.

Provider CustomerCustomer

Zero-dollarPeering

T1

T2

T3

T4

C2

C1

C3

B2

B3

B1

B2

CB

T

Implications – equivalent bilateral settlements

$ $$

$ $ $

$ $$

$$$

CR

BR$ $$

$ $ $$ $$

$ $ $

• If CR >> BR, bilateral implementations:– Reverse Customer/Provider: Transits compensate Eyeballs. – Paid Peering: content-side compensate eyeball-side.– New settlements are needed to sustain a stable structure.

Customer Provider

Paid Peering

• Content-Transit-Eyeball ISP model– Customer demand, revenue generation.

– Closed-form Shapley value for regular topologies.

– Dynamic Programming for general topologies.

• Implications for current bilateral settlements– Transit ISPs might need to compensate Eyeball ISPs,

which creates a Reverse Customer/Provider settlement.

– Paid Peering settlement might exist among Transit ISPs.

• Guideline for – Government: make regulatory policy for the industry.

– ISPs: negotiate stable and incentive settlements.

Summary