Pricing under Constraints in Access Networks: Revenue Maximization and Congestion Management

Abstract—This paper investigates pricing of Internet connectivity services in the context of a monopoly ISP selling broadband access to consumers. We first study the optimal combination of flat-rate and usage-based components in access price for maximization of ISP revenue subject to a capacity constraint on the resulting data-rate demand. Next, we consider time-varying consumer utilities for broadband data rates that can result in uneven demand for data-rate over time. Practical considerations limit the viability of altering prices over time to smoothen out the demanded data-rate. Despite such constraints on pricing, our analysis reveals that the ISP can retain the revenue by setting a low usage fee and dropping packets of consumer demanded data that exceed capacity. We also characterize the loss in ISP revenue if regulatory attention prevents such congestion management. Regulatory requirements further impose limitations on price discrimination across consumers, and we derive the ...

• Type: Journal
• Year: 2010
• Where: INFOCOM
• Authors: Prashanth Hande, Mung Chiang, A. Robert Calderbank, Junshan Zhang
• Keywords: Access Price, Communications, INFOCOM 2010, ISP Revenue, Pricing