CESG Fishbowl (Room 333 WEB)
Dept. of Industrial and Enterprise Systems Engineering,
University of Illinois at Urbana-Champaign
(joint work with Debasis Mitra)
Best Effort service, which has been provided under a low subscription fee for broadband connection and with free usage, has contributed to the enormous growth of the Internet and creation of many innovative network applications. In the current discussion on Net Neutrality, an important question is whether this essential feature of the Internet can be preserved if an ISP is allowed to offer Managed Service with guaranteed quality of service (QoS). The concern is that the ISP will then have the incentive to induce subscribers to pay the premium price to use Managed Service by withholding necessary provisioning and investments in bandwidth for Best Effort service, and thus undermining its quality, and more generally, the vitality of the Internet.
We develop a model-based approach to analyze the equilibrium outcome of the above scenario. Our model features a monopoly ISP that offers both Best Effort service for free use and Managed Service with guaranteed QoS for a fee per-use. Our analysis starts from modeling optimal choices of consumers regarding whether to subscribe to the broadband network, which service (Best Effort or Managed Service) to use, and the usage of the chosen service. The ISP controls the usage fee of Managed Service and bandwidth for both types of services, and maximizes profit, either myopically or strategically. We study ISP’s decision-making in the presence of usage-generated applications, the number of which follows a birth-death process. We show that the need for these applications stabilizes the offering of Best Effort service, especially in cases with a strategic ISP whose profit-maximization strategy involves preserving Best Effort service as a breeding ground of new applications that fuel the profit growth of Managed Service
Qiong Wang is an associate professor at Department of Industrial and Enterprise Systems Engineering, University of Illinois at Urbana-Champaign. Before joining UIUC, he had worked at Alcatel-Lucent Bell Labs as a Member of Technical Staff. His research focuses on stochastic control of manufacturing and inventory systems, and network economics that includes pricing, revenue management, and public policy analysis. His work has appeared in Management Science, Operations Research, JSAC, IEEE Transaction on Networking, and other top journals. Professor Wang received his Ph. D in Engineering and Public Policy, and also a master degree in Electrical and Computer Engineering from Carnegie-Mellon University.