ISP vs. ISP+CDN: Can ISPs in Duopoly Profit by Introducing CDN Services?Dongmyung LeeSeoul National UniversityJune 11, 2012

Joint work with J. Mo and J. Park

W-PIN 2012, London, UK

Contents• Introduction•Model•The Game•Numerical Results•Conclusion

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What is Content Delivery Network (CDN)?

CDN: Content Delivery Net-work

ISP A

CP BCP A

ISP B

User A User B

Re-gion:

<Internet Ecosystem without CDN provider>

: Traffic Flow

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A B

What is Content Delivery Network (CDN)?

CDN: Content Delivery Net-work

ISP A

CP BCP A

ISP B

User A User B

Re-gion:

<Internet Ecosystem with CDN provider>

: Traffic Flow

CDN

: Cash Flow

$$$

CacheServer

CacheServer

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A B

Current Issues related to CDN• ISP-operated CDN

▫ “BT Wholesale Readies CDN Launch” (Video Nuze, 2010) “The goal is to…maintain highest quality of service to their content customers”

▫ “AT&T Announces New CDN Service” (ReadWrite Cloud, 2011) “AT&T will enable content to flow directly from its 38 data centers around the world, to reduce tran-

sit and latency times

• Other Telco CDNs▫ Level 3▫ Verizon▫ Deutsche Telekom▫ Orange France Telecom▫ Korea Telecom▫ …

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Problem Statement

ISP Ausers CPs <Relationship without CDN>

ISP Ausers CPs

CDN

CDN: Content Delivery Net-work

<Relationship with CDN>

<Relationship with ISP+CDN>ISP Ausers CPs

CDN

• Key Question:▫ Is there an incentive for an ISP under competition to vertically integrate CDN?

ISP+CDN

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Model• Two-sided market with ISPs as platforms• ISPs are located à la Hotelling where consumers and CPs are distributed in

[0,1]

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Utility• Consumer and CP Utility (Hotelling model)

▫ Consumer’s Utility

▫ Content Provider’s Utility

• ISPs’ Payoffs

ti: market share of ISP i in the consumer side si: market share of ISP i in the CP side hi: hit ratio of ISP i‘s cache server

▫ Full market coverage:

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Delay• Delay function

τi: incoming traffic of ISP i’s network βi: network capacity parameter (capa.=1/βi)

▫ Network delay

▫ User’s perceived delay

▫ CP’s perceived delay

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The Game• 4-stage Stackelberg game

1. CP pricing decisions: ISPs determine CP prices a1 and a2

2. CP connection decisions: CPs choose the ISPs

3. Consumer pricing decisions: ISPs determine User prices p1 and p2

4. User connection decisions: Users choose the ISPs

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Market Share• Market Share of an ISP on one side becomes a function of the other

• Definition 1. (Equilibrium Market Share) An equilibrium market share is defined as the pair (t1

*, s1*) that satisfies

• Proposition 1. There exists an equilibrium market share

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Numerical Results (with low congestion, β=3)

• “Competition effect” vs. “Delay reduction effect”

MS of ISP+CDN

MS of pure ISPDelay advan-tage

Price advantagePrice decrease

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ISP+CDN vs. pure ISP: Who is better?• Map of dominance

▫ Linear cache server cost assumption

[Delay reduction effect] : [Competition ef -fect]

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THANKS AND QUES-

TIONS

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