Pricing Data Network Transport Services: Review and Directions

We take inventory of recent research on the pricing of data network services and give an outlook on future research directions. This is a vast subject area. It is therefore important to clearly define the scope of this overview. First, we focus on the pricing of data transport services and not of information content. Second, we do not consider problems that may occur in the allocation and pricing of storage and computing resources (e.g., web hosting, database and application servers). Third, we focus on the economics of data transport and not on the technology. We will discuss key technology concepts where necessary. However, in doing so we abstract from specific implementation details and will instead be concerned with those features that are most relevant to the economic issues. Fourth, reflecting the focus of most research to date, our discussion of recent work will mostly focus on pricing in markets with a single network provider. We give some attention to issues that arise in multi-provider markets, including competition between and pricing among providers, but more work is needed in this area as we note in our outlook. From the point of view of economics, managing the network infrastructure can be described as a complex resource allocation problem in the presence of multiple decentralized, self-interest decisionmakers with private information. Economic theory on pricing, games, mechanism design, and externalities provides tools for tackling problems with similar features. It is therefore important to describe the features of the network environment that are relevant for economics-driven network management as a basis for identifying in which ways they permit an application of existing theory and in which ways they require the development of new theory. We focus on this task in the introduction. Next, we discuss the pricing of customer services and turn to pricing and interconnection issues. We close with an outlook on future research directions.