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The Effect of Data Caps upon ISP Service Tier Design and Users

Published:24 June 2015Publication History
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Abstract

We model the design and impact of Internet pricing plans with data caps. We consider a monopoly ISP that maximizes its profit by setting tier prices, tier rates, network capacity, data caps, and overage charges. We show that when data caps are used to maximize profit, a monopoly ISP will keep the basic tier price the same, increase the premium tier rate, and decrease the premium tier price and the basic tier rate. We give analytical and numerical results to illustrate the increase in ISP profit, and the corresponding changes in user tier choices, user surplus, and social welfare.

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  1. The Effect of Data Caps upon ISP Service Tier Design and Users

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    SeonYeong Han

    Data caps are known as an effective tool to manage people's data usage over cellular or Internet service provider (ISP) networks. Since many people control their data usage to avoid overage charges, there has been argument around the data cap policy among ISPs and users. However, there is little academic study about the effect of data caps. The motivation of this paper is to clarify the effect of billing components for multiple tiers on ISP profit and user tier choice. The billing components include the basic tier price, the basic tier rate, the premium tier price, the premium tier rate, the data cap, and the overage charge. To formulate the billing policy, the paper distinguishes the data traffic for web browsing and video streaming. The authors model the user's willingness to pay for web browsing and video streaming using the user's time devoted to each application-one of the paper's main contributions. Based on the willingness-to-pay model, it is possible to measure the user surplus over various billing policies. A sophisticated profit model is presented and the effects of the model on the ISP and users are analyzed. Through the analysis and numerical results, the paper shows some interesting findings about users' behavior regarding the relative value they place on streaming and their willingness to pay. Data traffic occurs not only as a result of people browsing the web or streaming video, but also as a result of using some applications. For example, file downloading can be activated by applications for updates or peer-to-peer cooperation. It will be interesting to study the effect of data traffic from applications, because it will increase costs. Online Computing Reviews Service

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    • Published in

      cover image ACM Transactions on Internet Technology
      ACM Transactions on Internet Technology  Volume 15, Issue 2
      June 2015
      89 pages
      ISSN:1533-5399
      EISSN:1557-6051
      DOI:10.1145/2796692
      • Editor:
      • Munindar P. Singh
      Issue’s Table of Contents

      Copyright © 2015 ACM

      Publisher

      Association for Computing Machinery

      New York, NY, United States

      Publication History

      • Published: 24 June 2015
      • Accepted: 1 May 2015
      • Revised: 1 November 2014
      • Received: 1 November 2013
      Published in toit Volume 15, Issue 2

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