Abstract
The continuous growth of internet traffic is significantly pushed by emerging high bandwidth demanding contents. All participants in the content provisioning process including content providers, service providers, Content Delivery Networks (CDN) and customers are influenced by bandwidth requirements. Appropriate bandwidth demand estimation is of great importance for addressing resource investment. Providers in content provisioning process need to consider cloud migration in order to minimize costs. The vertical interconnection between involved providers is necessary. Larger undertakings often perform vertical integration, thus ensuring a higher control over different segments of the process. The vertically integrated content provider's incentives for cloud migration can induce significant changes in interconnection contracts in the content provisioning process. In this chapter different methods of vertical interconnection charging among vertically integrated providers are analyzed and compared.
TopBackground
Interconnection refers to physical and logical connecting between involved providers with the aim of provisioning the access to contents, applications or services. Intrinsically, interconnection enables customers connected to one network to communicate with customers of the same or different network. More precisely, vertical interconnection represents interconnection between undertakings on different network's levels. It is a set of legal rules, technical and operational arrangements which providers use to connect their equipment, networks and services. The actors in the content provisioning process often perform vertical integration that is the process of regrouping several segments of the content provisioning process under the control of a single undertaking. Vertical integration can internalize costs for big actors in the content provisioning process, such as global content providers, but also for service providers, which also can benefit from offering their own contents, applications or services. In addition, vertical integration is economical, efficient and it enables achievement of economies of scale (Dai & Tang, 2009). Vertical integration eliminates double marginalization (the effects of market power at consecutive vertical layers) which occurs when undertakings at consecutive layers have monopoly power and each undertaking reduces the output from the competitive level to the monopoly level, leading to overall losses. Also, vertical integration provides better adjustment of supply and demand. Therefore, it improves efficiency, provides more opportunities for profit maximization, and makes innovations more relevant (Maille & Tuffin, 2014).
Key Terms in this Chapter
Cloud Migration: Storing a portion of the most popular content provider's contents into the cloud resources with the aim of enabling access to those contents whenever capacity of the self-owned servers is occupied.
On-Demand: Pricing plan which enables cloud providers' customers to pay only for utilized resources per time unit, usually on the hourly basis. Cloud instances are retained for indefinite time.
Cost Sharing: Integration contract which allocates costs to all undertakings in a fair manner. Cost share among providers is defined in accordance with contribution in total costs of each provider in content provisioning process.
Spot Pricing: An auction-like mechanism where cloud providers' customers submit bids, i.e. maximum price they are willing to pay for specific cloud instance. The access to cloud instances is enabled as long as submitted bid exceeds cloud provider’s last computed market clearing price.
Wholesale Price: Integration contract among providers based on the determination of the unit wholesale price for a given service. Demand and traffic volume are highly dependent on defined wholesale price.
Vertical Integration: The process of regrouping several segments of the content provisioning process under the control of a single undertaking.
Vertical Interconnection: Physical and logical connecting between undertakings involved in content provisioning process on different network levels, with the aim of providing the access to contents.
Revenue Sharing: Integration contract which defines modality of revenue shares between providers involved in all forms of provider’s integration. It is characterized with operational simplicity and possibility of rebalancing the returns of the providers when retail prices are distorted.
Reservation: Cloud providers' customers pay an upfront reservation fee in order to reserve cloud resources for a specific period of time. In return, they receive a significant discount on the hourly resource usage price.