Interconnection- An Economic Perspective.ppt
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1、Interconnection: An Economic Perspective,Peyman Faratin (CSAIL) Steven Bauer (CSAIL) David Clark (CSAIL) Bill Lehr (CSAIL) Arthur W Berger (Akamai,CSAIL) Patrick Gilmore (Akamai) Tom Wilkening (Economics),Interconnection Problem,AT&T - Carter phone & Hush-a-Phone (blocking) . 2002: Madison-River - V
2、onage (blocking) 2005: Cogent-Level 3 (disconnecting) 2006: AT&T - Google (tiering) 2007: T-Mobile2 (blocking) ICE (Farrell and Weiser), Agency (Milgrom et.al), Entry Story - because of lack of quality competition in interconnection Two-Sided Markets (New Institutionalist Model) A model of value-flo
3、ws - demand information Market failures “middlebox”/overlays entry Interconnection discrimination incentives (given cost-allocation mechanism),Industrial Organization: Two-Sided Markets,Generative: Design aidBusiness ModelDescriptive: future regulatory thinking,Causal Hypothesis of Interconnection P
4、roblems,Architecture,IO & Contracts,Information & Behaviors,Outcomes,The Trinity: Institution, Strategies and Outcomes,Institutionarchitecturecontractpolicy,OutcomesScalability, Resilience, ConvergenceFairness, Innovation, Profitability,Strategic Agents,Transfer Distribution Ambiguities (“we know ho
5、w to route packets but not money”),AS1,AS2,content,$,AS1,AS2,$,Ambiguities Galore,AS1,AS2,content,$,AS2,$,AS1,content,AS2,$,AS1,Solution: Bi-lateral Volume-Based Contracts,Retail market (bursty): Flat-rate Peak-rate tiered pricing Wholesale market (better aggregation “deeper in”): Full transit Trans
6、fer level = non-linear Transfer structure = asymmetric Peering Transfer level = 0 Transfer structure = N/A Emerging mechanisms: Paid-peering & Partial Transit Distribution of Fixed and Usage pricing,Architecture,IO & Contracts,MIT,http:/,End-Hosts Bear Cost of Transport,$,$,$,$,$=0,$=0,No E2E Accoun
7、ting for Tastes,Coordination Failures Has Led to E2E Market-Failures,Market-Failure Induced CDN Entry AKAM: 20,000 servers,900 networks,70 countries,750 cities, serving 15% of content,Strategies and Outcomes,Contracts,Information & Behaviors,Outcomes,The Trinity: Institution, Strategies and Outcomes
8、,Institutionarchitecturecontractpolicy,OutcomesFairnessGrowthProfitability,Strategic Agents,Who Should Pay Who? Primitive = Value-Flows,ISP,i,j,Pi,Pj,pi,pj,I,II,III,IV,(0,0),“Free Goods”,Q: what is the optimal price structure for ISP to maximize profits?,eyeball,Content Provider,Value-Flow Discrimin
9、ation,Q: what is the optimal price structure? A: Depends on:Relative size of value flows (cross-market externalities)Fixed / Per transaction pricesSingle v.s Multi-homing,pi,pj,45o,ISP,i,j,Pi,Pj,eyeball,Content Provider,Established commercial web-server $ ISP $ eyeballs,Complementarities/Interaction
10、s: Multi-Product Markets,Value-Flows/Externalities: Chicken-Egg Problems,Two-Sided Markets,But platform has to solve “chicken-egg” Problem: if there were more women, then more men would come, more women would come, more men would come,. discrimination is welfare enhancing. “ladies nights”,Non-Discri
11、mination Institution,Strategic Agents,Does Institution Implement Desired Outcome?,Rule (motivated by “fairness”): No bars can access discriminate based on sex Q: Does rule implement a “fair” & innovative outcome in the presence of strategic actors?A: No. Institution is “fair” but gives no growth inc
12、entives. Neutrality rule is not neutral with respect to growth tussle between objectives,Result of Rule: Closes Some Markets, Others Grow but Inefficiently,Strategic Preferences of Content Providers & Users,ISP,$,Eyeballs,Growing WebServer,ISP,$,Eyeballs,Established WebServer,$,ISP,?$,Eyeballs,Publi
13、c WebServer,?$,$,Strategic Agent Preferences: The Platform (in Presence of Externalities),Platform (ISP/CDN) solves for efficient prices: market price level ( ) and price structure Profit maximizing pricing structure in presence of externalities is often discriminatory (subsidize one side of the mar
14、ket to stimulate demand on other side - c.f. bar) Strong incentives to discriminate,Network Neutrality Law or Current Architecture & Protocols,Institution“the architecture cant / shouldnt do that”“no price discrimination for same service”,OutcomesFairnessGrowth,Strategic Agents (1:Customer, 2:Conten
15、t Provider),3: Platform: ISP,Unintended Outcome of Institution: Market Closures,Externalities Create Surplus Expansion Opportunities (v.s. Capture),Traditional (one-sided) Price discrimination Discrimination increases the profits of the monopolist but may open some markets that would otherwise be cl
16、osed. platform intermediaries in a TSM seek to maximize profit by transferring surplus from seller to consumer thereby growing the market Growth on one side of the market induces growth on the other, creating surplus that can be captured,Market-Failure Induced CDN Entry: Akamai: 20,000 servers, 900
17、networks, 70 countries, 750 cities, serving 15% of content,Architectural Tools We Provide,The real question is how to architect for it: Change in demand in i market / change in demand in j market Source-destination discrimination App discrimination Per packet/per flow bit discriminate Encryption . T
18、here is a delicate tradeoff involved in how much information we provide and how much we lose/gain in objectives we are interested in,Architecture,IO & Contracts,Information & Behaviors,Outcomes,Conclusion,Interconnection Not only a L2, L3 problem Contract engineering and value-flows Agents use mecha
19、nisms strategically Tussle over outcomes Open Questions: Preferences over outcomes/objectives CDN Tipping and Market-Power 2 tiered Internet? Externality Information for monitoring and regulation Industrial Organization A tool for architecture & policy,Future: ICWG,Data War Stories/cases Peering of
20、video Exclusivity contracts Games being played . Quantities and prices data to support theory data to build theory Informative process to all Designers ISPs Policy makers,Peymanmit.edu,Auxiliary Slides (I),Information and Strategic Games,Competition: Peering+Transit Strategic Interactions,All compet
21、e to: establish and maintain peering Competition over: Eyeball Networks Content Colo CP (Apple iTunes, Microsoft,) Stub ASs (Yahoo, Google,) Non-stub Tier2 content (transit providers to content Stub AS),“Normal” Business Strategy of LE-LC,Strongest Peering Incentives,Assume LE-LC interconnect under
22、peering LCs problem is to keep ratios,LE-LC Strategies,Observations: Eyeballs are fixed, content can move (switching costs of content is lower) perception of bargaining power by LE LE doesnt care about being out of balance & in fact wants to be out of ratios so it can demand payments (paid-peering),
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