Pricing strategies for user-provided connectivity services

User-provided connectivity (UPC) services offer a possible alternative, or complement, to existing infrastructure-based connectivity. A user allows other users to occasionally connect through its “home base” in exchange for reciprocation, or possibly compensation. This service model exhibits strong positive and negative externalities. A large user base makes the service more attractive, as it offers more connectivity options to roaming users, but it also implies a greater volume of (roaming) traffic passing through a user´s home base, which can increase congestion. These interactions make it difficult to predict the eventual success of such a service offering, and in particular how to effectively price it. This paper investigates a two-price policy where the first price is an introductory price that expires once service adoption reaches a certain level. The paper uses a simplified analytical model to investigate pricing strategies under this policy, and their sensitivity to changes in system parameters. The insight and practical guidelines this yields are validated numerically under more realistic conditions.