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A New Bilateral Arrangement between Interconnected Providers

Listed author(s):
  • Ruzana Davoyan


  • Jorn Altmann


  • Wolfgang Effelsberg

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

Cost allocation between interconnected networks is based on measured traffic flows. This principle, however, does not provide a fair way for sharing costs. In this paper, a new bilateral model, called Differentiated Traffic-based Interconnection Agreement (DTIA) for intercarrier compensation is presented. In particular, the approach aims to determine the original initiator of a transmission by means of traffic differentiation into two types and to compensate the interconnection costs. Unlike the existing financial settlements, under which the payments are made based on the traffic flows, the proposed method suggests costs compensation according to the differentiated traffic flows. Further, in order to support the described payment scheme, a simple and scalable traffic management mechanism was designed. The results obtained from the comparative analysis showed that determination of a transmission initiator induces cost sharing between all parties and therefore, reduces the interconnection payments between providers.

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Paper provided by Seoul National University; Technology Management, Economics, and Policy Program (TEMEP) in its series TEMEP Discussion Papers with number 201044.

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Length: 17 pages
Date of creation: Jan 2010
Date of revision: Jan 2010
Publication status: Published in ICQT 2009, 6th International Workshop on Internet Charging and QoS Technologies, Aachen, Germany, May 2009
Handle: RePEc:snv:dp2009:201044
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  1. Mark Armstrong, 2006. "Competition in two‐sided markets," RAND Journal of Economics, RAND Corporation, vol. 37(3), pages 668-691, September.
  2. Armstrong, Mark, 2001. "The theory of access pricing and interconnection," MPRA Paper 15608, University Library of Munich, Germany.
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