Maximal profit dimensioning and tariffing of loss networks with cross-connects

In this paper, we present an approach to optimal dimensioning and tariffing of communication networks. We choose link capacities, tariffs, and the routing strategy in order to maximise the profit for the company operating the network. The tariffs and grade of service are subject to regulatory constraints. It is assumed that we have an existing network structure consisting of a set of nodes and physical links. By cross-connecting traffic through nodes at a high bandwidth rather than multiplexing and demultiplexing it, a logical link (consisting of capacity on several physical links) is created. However, it may be better for an OD pair to take advantage of existing physical links rather than to initiate its own logical link. Several results will be presented. These include a simple formula for the optimal tariff and a result that only one of the possible routes for each OD pair will be used in the optimal solution. A numerical investigation will also be discussed.