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Anticipating the Metering and Anticipating the Metering and Settlement Implications of Settlement Implications of the Drive for Internet Quality the Drive for Internet Quality of Serviceof Service
Joseph P. Bailey, Ph.D.Joseph P. Bailey, Ph.D.
<[email protected]><[email protected]>
Robert H. Smith School of Robert H. Smith School of BusinessBusiness
University of Maryland, USAUniversity of Maryland, USA
www.rhsmith.umd.edu/tbpp/www.rhsmith.umd.edu/tbpp/jbailey/pubjbailey/pub
© Joseph P. Bailey, 1998
OutlineOutline
Defining Quality of ServiceDefining Quality of Service Interconnection ModelsInterconnection Models Pricing PoliciesPricing Policies Interconnection and QoSInterconnection and QoS Analysis and ConclusionsAnalysis and Conclusions
© Joseph P. Bailey, 1998
Internet EconomicsInternet Economics
Research and Research and education in education in
ensuring the self-ensuring the self-sustaining sustaining
economic growth economic growth of the Internetof the Internet
© Joseph P. Bailey, 1998
Quality of Service (QoS)Quality of Service (QoS)
User-definedUser-defined End-to-End service is often requiredEnd-to-End service is often required Heterogeneous applications have Heterogeneous applications have
different bandwidth requirementsdifferent bandwidth requirements Network separates different classes of Network separates different classes of
traffic (no longer traffic (no longer justjust best effort service) best effort service) Trade-off of different quality metrics is Trade-off of different quality metrics is
possiblepossible
© Joseph P. Bailey, 1998
QoS ProtocolsQoS Protocols
Internet Protocol version 4 (IPv4)Internet Protocol version 4 (IPv4)• ReSerVation Protocol (RSVP)ReSerVation Protocol (RSVP)• Real Time Protocol (RTP)Real Time Protocol (RTP)
Internet Protocol version 6 (IPv6)Internet Protocol version 6 (IPv6)
how these technologies will be diffused is how these technologies will be diffused is unknown and requires proper economic unknown and requires proper economic
incentivesincentives
© Joseph P. Bailey, 1998
Interconnection ModelsInterconnection Models
Peer-to-Peer BilateralPeer-to-Peer Bilateral Hierarchical BilateralHierarchical Bilateral Third Party AdministratorThird Party Administrator Cooperative AgreementCooperative Agreement
sizesizeexperienceexperiencetechnologytechnologycustomer basecustomer base}}
Interconnection increases social Interconnection increases social welfare, but benefits (and prices) are welfare, but benefits (and prices) are
often asymmetric!often asymmetric!
© Joseph P. Bailey, 1998
Pricing PoliciesPricing Policies
Flat-RateFlat-Rate Capacity-BasedCapacity-Based
• pricing based upon expected usepricing based upon expected use Usage-SensitiveUsage-Sensitive
• pricing based upon actual usepricing based upon actual use• accounting and settlementsaccounting and settlements
© Joseph P. Bailey, 1998
Comparison of Comparison of Interconnection ModelsInterconnection Models
PPeeeerr--ttoo--PPeeeerrBBiillaatteerraall
HHiieerraarrcchhiiccaallBBiillaatteerraall
TThhiirrdd PPaarrttyyAAddmmiinniissttrraattoorr
CCooooppeerraattiivveeAAggrreeeemmeenntt
EExxaammpplleess IISSPP--IISSPP IIAAPP--IISSPP MMAAEE--EE FFIIXXNNeettwwoorrkkEExxtteerrnnaalliittiieess
mmuuttuuaallllyybbeenneeffiicciiaall
aassyymmmmeettrriicc ––mmoorree bbeenneeffiicciiaallttoo tthhee ssmmaalllleerrffiirrmm
ppoossiittiivveeffeeeeddbbaacckk
ppoossiittiivveeffeeeeddbbaacckk
CCoossttss eeqquuaall sspplliitt ssmmaalllleerr ffiirrmmppaayyss mmoorree
aallll ffiirrmmss ppaayyttoottaall ccoosstt ++pprrooffiitt
aallll ffiirrmmss ppaayyttoottaall ccoosstt
AAggrreeeemmeenntt ccoonnttrraacctt ccoonnttrraacctt ccoommmmoonn ccaarrrriieerr ccoommmmoonn ccaarrrriieerrAAccccoouunnttiinngg ppoossssiibbllee ppoossssiibbllee pprroobbaabbllee nnoott lliikkeellyyBBeesstt EEffffoorrtt PPrriicciinnggPPoolliicciieess
ccaappaacciittyy--bbaasseedd,,uussaaggee--sseennssiittiivvee,,aanndd ffllaatt--rraattee
ccaappaacciittyy--bbaasseedd,,uussaaggee--sseennssiittiivvee,,aanndd ffllaatt--rraattee
uussaaggee--sseennssiittiivvee,,ccaappaacciittyy--bbaasseedd
ccaappaacciittyy--bbaasseedd,,ffllaatt--rraattee
RReesseerrvvaattiioonnPPrriicciinngg PPoolliicciieess
uussaaggee--sseennssiittiivvee uussaaggee--sseennssiittiivvee uussaaggee--sseennssiittiivvee uussaaggee--sseennssiittiivvee
© Joseph P. Bailey, 1998
Tragedy of the Internet Tragedy of the Internet Commons?Commons?
Without pricing there is no incentive Without pricing there is no incentive to ask for a lower quality of serviceto ask for a lower quality of service
There may not be enough high-There may not be enough high-quality service for all who request itquality service for all who request it
Pricing may fluctuate with demand Pricing may fluctuate with demand for optimal allocation of bandwidthfor optimal allocation of bandwidth
Incentive to artificially congest your Incentive to artificially congest your network?network?
© Joseph P. Bailey, 1998
Plan for QoS adoptionPlan for QoS adoption
Identify adoption of new technologies Identify adoption of new technologies within your organizationwithin your organization• Will you adopt QoS?Will you adopt QoS?• When will you adopt?When will you adopt?
Enter bilateral contracts specifying QoS Enter bilateral contracts specifying QoS parametersparameters• price, bandwidth, TCP protectionprice, bandwidth, TCP protection
Do not enter into contracts that extend Do not enter into contracts that extend beyond your technology horizonbeyond your technology horizon
© Joseph P. Bailey, 1998
ConclusionsConclusions
All models of interconnection agreements All models of interconnection agreements may be vulnerable to opportunismmay be vulnerable to opportunism
Trust between parties may alleviate the Trust between parties may alleviate the need for usage-sensitive pricing, however...need for usage-sensitive pricing, however...
Usage-sensitive pricing will become more Usage-sensitive pricing will become more pervasivepervasive• accounting and billing standards neededaccounting and billing standards needed• prices that provide proper incentives must be setprices that provide proper incentives must be set