Modeling the relationship between network operators and venue owners in public Wi-Fi deployment using non-cooperative game theory

Abstract

Wireless data demands keep rising at a fast rate. In 2016, Cisco measured a global mobile data traffic volume of 7.2 Exabytes per month and projected a growth to 49 Exabytes per month in 2021. Wi-Fi plays an important role in this as well. Up to 60% of the total mobile traffic was off-loaded via Wi-Fi (and femtocells) in 2016. This is further expected to increase to 63% in 2021. In this publication, we look into the roll-out of public Wi-Fi networks, public meaning in a public or semi-public place (pubs, restaurants, sport stadiums, etc.). More concretely we look into the collaboration between two parties, a technical party and a venue owner, for the roll-out of a new Wi-Fi network. The technical party is interested in reducing load on its mobile network and generating additional direct revenues, while the venue owner wants to improve the attractiveness of the venue and consequentially generate additional indirect revenues. Three Wi-Fi pricing models are considered: entirely free, slow access with ads or fast access via paid access (freemium), and paid access only (premium). The technical party prefers a premium model with high direct revenues, the venue owner a free/freemium model which is attractive to its customers, meaning both parties have conflicting interests. This conflict has been modeled using non-cooperative game theory incorporating detailed cost and revenue models for all three Wi-Fi pricing models. The initial outcome of the game is a premium Wi-Fi network, which is not the optimal solution from an outsider’s perspective as a freemium network yields highest total payoffs. By introducing an additional compensation scheme which corresponds with negotiation in real life, the outcome of the game is steered toward a freemium solution.