An Internet Cost Model, Assignment of Costs Based on Actual Network Use

An Internet Cost Model, Assignment of Costs Based on Actual Network Use

Miguel Ramírez (Telecommunications Consultant, Universitat Politécnica de Catalunya, Barcelona, Spain), Alfredo Gutiérrez (Universitat Politécnica de Catalunya, Barcelona, Spain), Josep Maria Monguet (i2Cat - Universitat Politécnica de Catalunya, Barcelona, Spain) and Christian Muñoz (Department of Engineering and Industrial Systems, Universidad Nacional de Colombia, Bogota, Cundinamarca, Colombia)
Copyright: © 2012 |Pages: 16
DOI: 10.4018/jwp.2012100102
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Abstract

In a transforming, complex, and innovating telecommunications industry with evolving business models, providers have to resolve how the pricing of their services in a context with many unknowns and few equations. This paper proposes a cost assignment model based on differentiating the set of required services a user consumes in a granular network architecture, to get a requested content. Unlike the flat rate model, this model is focused on obtaining a variable pricing methodology that reflects the actual use of network resources that users utilize to get specific content. There are exploring elements to establish the importance of this topic; the theoretical models of pricing are reviewed, the complexity of the costing issue and the influence of content providers on the real network operating cost are explored. Also, a precise cost model is proposed, as well as some cases of the application of the model in the real world.
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Introduction

An Industry in Transformation

The “one system, one policy, universal service” method that Theodore Vail managed to impose in the origins of telecommunications is known today as Internet, a system of great complexity which has remained as a unique and universal scale service that has transformed one of the most dynamic markets in the world.

Internet provides an unprecedented convergence of services and has also added new players to the market, who have gained dominant positions and prevailed over classical operators. For the operators, the fact of being the physical network owners has not only given them an absolute advantage, but also the responsibility of keeping up the investments for the progressive development of a new generation of networks.

The proliferation of new business practices, such as new ways of network administration, prioritization, pricing, or strategic partnerships, suggests that the nature of the competence is changing, according to the maturity of the industry. It is argued that network neutrality and other proposals to restrict such practices have the risk of diverting the industry from its natural evolution path, while others claim the network neutrality has to be something sacred and must be a distinct market (Crowcroft, 2007; Yoo, 2010a).

In the U.S. as in Europe, as a part of the 2020 digital agenda, studies to re-design the Internet Protocol, from scratch or evolutionarily, are sponsored. The acceleration of innovation and the rupturistic way in which new services appear on the Internet are a challenge, not only for public policies but also for the network architecture itself. The proliferation of Video Over IP Services, wireless broadband, cloud computing, programmable networks, sensors networks, and in general how people use the network, may require the Internet to be developed in new ways (Yoo, 2010b).

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