Optimal Provisioning and Pricing of Internet Differentiated Services in Hierarchical Markets

Abstract

Network service providers contract with network owners for connection rights, then offer individual users network access at a price. Within this hierarchy, the service provider must carefully provision and allocate (price) network resources (e.g. bandwidth). However, determining the appropriate amount to provision and allocate is problematic due to the unpredictable nature of users and market interactions. This paper introduces methods for optimally provisioning and pricing differentiated services. These methods maximizes profit, while maintaining a low blocking probability for each service class. The analytical results are validated using simulation under variable conditions. Furthermore, experimental results will demonstrate that higher profits can be obtained through shorter connection contracts.