Advanced Networks Colloquium: Saswati Sarkar, Economics of Interaction among Heterogeneous Providers
Friday, October 7, 2016
1146 AV Williams Building
The Economics of Interaction among Heterogeneous Providers in a Non-Neutral Network
Saswati Sarkar (EE Ph.D. 00)
University of Pennsylvania
Recent debates, court rules, and FCC proposals on net-neutrality rules suggest that the policy landscape of the Internet is changing. In our work, we 1) assess whether individual stakeholders of the Internet market, i.e. Internet Service Providers (ISPs), Content Providers (CPs), and End-Users (EUs), have the incentive to adopt a non-neutral pricing scheme; and if yes 2) what are the pricing strategies they choose; and 3) how these changes affect the Internet market. In this talk, we focus on the first question. We consider two types of ISPs: neutral ISPs and those that switched to non- neutrality, i.e. non-neutral ISPs. We also consider that one of the CPs can differentiate between ISPs by controlling the quality of the content she is offering on each one. In our model, EUs decide on the ISP they want to buy Internet from based on the price, quality, and heterogeneous levels of innate preferences for ISPs. These preferences capture the market power of the ISPs. We formulate a sequential game, and explicitly characterize all the possible Sub-game Perfect Nash Equilibria (SPNE) of the game. We also prove that when innate preferences of ISPs are either high or low, there exists a unique SPNE, and explicitly characterize it. Extensive numerical results reveal that the CP receives the same payoff, the neutral ISP receives a lower payoff, and the non-neutral ISP receives a higher payoff (most of the time) in a non-neutral scenario. However, we also identify scenarios in which the non-neutral ISP loses payoff by adopting non-neutrality suggesting that under these scenarios a non-neutral regime would not emerge even in the absence of net-neutrality rules. In addition, we show that a non-neutral regime yields a higher welfare for EUs than a neutral one if the market power of the non-neutral ISP is small, the sensitivity of EUs (respectively, the CP) to the quality is low (respectively, high), or a combinations of these factors. Thus, non-neutrality in general is profitable for the ISP that adopts it, but not always profitable for the CP and EUs.
Saswati Sarkar received her Master of Engineering degree from the Electrical Communication Engineering Department at the Indian Institute of Science, Bangalore in 1996 and the Ph.D. degree from the Electrical and Computer Engineering Department at the University of Maryland, College Park, in 2000. She joined the Electrical and Systems Engineering Department at the University of Pennsylvania, Philadelphia, as an Assistant Professor in 2000 where she is currently a Professor. She received the Motorola gold medal for the best masters student in the division of electrical sciences at the Indian Institute of Science and a National Science Foundation (NSF) Faculty Early Career Development Award in 2003. She was an Associate Editor of the IEEE Transactions on Wireless Communications from 2001 to 2006, and of the IEEE/ACM Transactions On Networks from 2008 to 2013. Her research interests are in stochastic control, resource allocation, dynamic games, and economics of networks.