Pricing and revenue sharing strategies for Internet service providers

One of the challenges facing the networking industry today is to increase the profitability of Internet services. This calls for economic mechanisms that can enable providers to charge more for better services and collect a fair share of the increased revenues. In this paper, we present a generic pricing model for Internet services jointly offered by a group of providers. We show that noncooperative pricing strategies may lead to unfair distribution of profit and may even discourage future upgrades to the network. As an alternative, we propose a fair revenue-sharing policy based on the weighted proportional fairness criterion. We show that this fair allocation policy encourages collaboration among providers, and hence can produce higher profits for all providers. Based on the analysis, we suggest a scalable algorithm for providers to implement this policy in a distributed way and study its convergence property.