Application Neutrality and a Paradox of Side Payments

TL;DR

This paper analyzes how side payments and differential application pricing impact revenues and neutrality in internet networks using a game-theoretic model, revealing a revenue paradox and exploring application neutrality issues.

Contribution

It extends an existing demand-response model to include side payments and application-specific pricing, providing new insights into revenue effects and neutrality debates.

Findings

Side payments can paradoxically reduce revenues for payees.

Differential application pricing affects revenue distribution between neutral and non-neutral models.

The model highlights complex interactions between pricing strategies and network neutrality.

Abstract

The ongoing debate over net neutrality covers a broad set of issues related to the regulation of public networks. In two ways, we extend an idealized usage-priced game-theoretic framework based on a common linear demand-response model. First, we study the impact of "side payments" among a plurality of Internet service (access) providers and content providers. In the non-monopolistic case, our analysis reveals an interesting "paradox" of side payments in that overall revenues are reduced for those that receive them. Second, assuming different application types (e.g., HTTP web traffic, peer-to-peer file sharing, media streaming, interactive VoIP), we extend this model to accommodate differential pricing among them in order to study the issue of application neutrality. Revenues for neutral and non-neutral pricing are compared for the case of two application types.