Price Setting in Two-Sided Markets for Internet Connectivity

Authors:
Thorsten Hau;Walter Brenner
Affiliations:
Institute of Information Management, University of St. Gallen, St. Gallen, Switzerland CH-9000;Institute of Information Management, University of St. Gallen, St. Gallen, Switzerland CH-9000
Venue:
ICQT '09 Proceedings of the 6th International Workshop on Internet Charging and Qos Technologies: Network Economics for Next Generation Networks
Year:
2009

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Abstract

Due to a lack of incentives, Internet peerings are a notorious bandwidth bottleneck. Through the use of direct interconnection and content delivery networks, content providers are able to provide better services to their customers. These technologies have a profound impact on the business models of internet service providers. Instead of competing for consumers and keeping uplink connection costs low, ISPs face a two-sided market in which they compete for EUs and generate revenues on the CP side of the market. This work presents a formal model for the providers' pricing decision towards content providers and discusses consequences for the Internet.