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ISP vs. ISP+CDN: Can ISPs in Duopoly Profit by Introducing CDN Services?

W-PIN 2012, London, UK . ISP vs. ISP+CDN: Can ISPs in Duopoly Profit by Introducing CDN Services?. Dongmyung Lee Seoul National University June 11, 2012. Joint work with J. Mo and J. Park. Introduction Model The Game Numerical Results Conclusion. Contents.

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ISP vs. ISP+CDN: Can ISPs in Duopoly Profit by Introducing CDN Services?

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  1. W-PIN 2012, London, UK ISP vs. ISP+CDN: Can ISPs in Duopoly Profit by Introducing CDN Services? Dongmyung Lee Seoul National University June 11, 2012 Joint work with J. Mo and J. Park

  2. Introduction • Model • The Game • Numerical Results • Conclusion Contents

  3. What is Content Delivery Network (CDN)? CDN: Content Delivery Network : Traffic Flow A B Region: CP A CP B ISP A ISP B User A User B <Internet Ecosystem withoutCDN provider>

  4. What is Content Delivery Network (CDN)? CDN: Content Delivery Network : Traffic Flow A B Region: : Cash Flow CP A CP B $ $ $ CDN ISP A ISP B Cache Server Cache Server User A User B <Internet Ecosystem withCDN provider>

  5. ISP-operated CDN • “BT Wholesale Readies CDN Launch” (Video Nuze, 2010) • “The goal is to…maintain highest quality of service to their content customers” • “AT&T Announces New CDN Service” (ReadWrite Cloud, 2011) • “AT&T will enable content to flow directly from its 38 data centers around the world, to reduce transit and latency times • Other Telco CDNs • Level 3 • Verizon • Deutsche Telekom • Orange France Telecom • Korea Telecom • … • Current Issues related to CDN

  6. Key Question: • Is there an incentive for an ISP under competition to vertically integrate CDN? Problem Statement CDN: Content Delivery Network ISP A users CPs <Relationship without CDN> ISP A users CPs <Relationship with CDN> CDN ISP+CDN ISP A <Relationship with ISP+CDN> users CPs CDN

  7. Two-sided market with ISPs as platforms ISPs are located à la Hotelling where consumers and CPs are distributed in [0,1] Model

  8. Consumer and CP Utility (Hotelling model) • Consumer’s Utility • Content Provider’s Utility • ISPs’ Payoffs • ti: market share of ISP i in the consumer side • si: market share of ISP i in the CP side • hi: hit ratio of ISP i‘s cache server • Full market coverage: Utility

  9. Delay function • τi: incoming traffic of ISP i’s network • βi: network capacity parameter (capa.=1/βi) • Network delay • User’s perceived delay • CP’s perceived delay Delay

  10. 4-stage Stackelberg game • CP pricing decisions: • ISPs determine CP prices a1 and a2 • CP connection decisions: • CPs choose the ISPs • Consumer pricing decisions: • ISPs determine User prices p1 and p2 • User connection decisions: • Users choose the ISPs The Game

  11. Market Share of an ISP on one side becomes a function of the other • Definition 1. (Equilibrium Market Share) An equilibrium market share is defined as the pair (t1*, s1*) that satisfies • Proposition 1. There exists an equilibrium market share Market Share

  12. “Competition effect” vs. “Delay reduction effect” Numerical Results (with low congestion, β=3) Delay advantage MS of pure ISP MS of ISP+CDN Price decrease Price advantage

  13. Map of dominance • Linear cache server cost assumption ISP+CDN vs. pure ISP: Who is better? [Delay reduction effect] : [Competition effect]

  14. THANKS AND QUESTIONS

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