Internet service provision and content services: Peering and service differentiation

Abstract

We consider the relationship of Internet service providers (ISP) like network operators and content service providers in the Internet ecosystem. Currently the position of ISPs is challenged by the emergence of powerful content service providers, especially with the spreading of bandwidth demanding video services. One issue here is that the further investment in the network capacity may be hindered by prevailing business models that largely exclude the ISPs from sharing in the major cash flows resulting from content provision. We develop modeling tools for evaluation of business models of ISPs in Internet ecosystem and present some results of this analysis. In particular, we model the relationship between content provider (CP) with significant market power and an ISP. We show that it can be profitable for content provider to resort to paid content peering, thus transferring to ISP a part of his content provision revenue. The resulting business model may provide substantial benefits to all major participants in this ecosystem: network providers, content and service providers and end users. In addition, we consider the situation when ISP also engages in content provision.