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Exploring the Effect of Traffic Differentiation on Interconnection Cost Sharing

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  • Ruzana Davoyan

    ()

  • Jorn Altmann

    ()

  • Wolfgang Effelsberg

    (Technology Management, Economics, and Policy Program (TEMEP), Seoul National University)

Abstract

This paper addresses the inter-provider costs sharing issue by exploring the effect of the traffic differentiation on the interconnection payments. In particular, we determine an original initiator of a transmission by means of traffic differentiation into two types, referred to as native and stranger. Unlike the existing financial settlement, under which the interconnection payments are made based on the net traffic flow, the proposed model governs cost compensations according to the differentiated traffic flows. Analytical studies were provided using Nash bargaining solution to explore how the determination of a transmission initiator affects intercarrier compensation. For this analysis we considered reciprocal and non-reciprocal access charges.

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Bibliographic Info

Paper provided by Seoul National University; Technology Management, Economics, and Policy Program (TEMEP) in its series TEMEP Discussion Papers with number 201042.

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Length: 18 pages
Date of creation: Jan 2010
Date of revision: Jan 2010
Publication status: Published in ICOMP 2009, International Conference on Internet Computing, Las Vegas, USA, July 2009
Handle: RePEc:snv:dp2009:201042

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Keywords: Interconnection arrangement; intercarrier compensation; Internet economics;

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  1. Ruzana Davoyan & Jorn Altmann, 2010. "Investigating the Role of a Transmission Initiator in Private Peering Arrangements," TEMEP Discussion Papers 201043, Seoul National University; Technology Management, Economics, and Policy Program (TEMEP), revised Jan 2010.
  2. Stanley Besen, 2001. "Advances in Routing Technologies and Internet Peering Agreements," American Economic Review, American Economic Association, vol. 91(2), pages 292-296, May.
  3. Armstrong, Mark, 2001. "The theory of access pricing and interconnection," MPRA Paper 15608, University Library of Munich, Germany.
  4. Michael Carter & Julian Wright, 1999. "Interconnection in Network Industries," Review of Industrial Organization, Springer, vol. 14(1), pages 1-25, February.
  5. Nicholas Economides, 1995. "The Economics of Networks," Working Papers 94-24, New York University, Leonard N. Stern School of Business, Department of Economics, revised Sep 1995.
  6. Michael Carter & Julian Wright, 2003. "Asymmetric Network Interconnection," Review of Industrial Organization, Springer, vol. 22(1), pages 27-46, February.
  7. Yoon Kiho, 2006. "Interconnection Economics of All-IP Networks," Review of Network Economics, De Gruyter, vol. 5(3), pages 1-15, September.
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