Unlike telephone operators, which pay termination fees to reach the users of another network, Internet Content Providers (CPs) do not pay the Internet Service Providers (ISPs) of users they reach. While the consequent cross subsidization to CPs has nurtured content innovations at the edge of the Internet, it reduces the investment incentives for the access ISPs to expand capacity. As potential charges for terminating CPs' traffic are criticized under the net neutrality debate, we propose to allow CPs to voluntarily subsidize the usagebased fees induced by their content traffic for end-users. We model the regulated subsidization competition among CPs under a neutral network and show how deregulation of subsidization could increase an access ISP's utilization and revenue, strengthening its investment incentives. Although the competition might harm certain CPs, we find that the main cause comes from high access prices rather than the existence of subsidization. Our results suggest that subsidization competition will increase the competitiveness and welfare of the Internet content market; however, regulators might need to regulate access prices if the access ISP market is not competitive enough. We envision that subsidization competition could become a viable model for the future Internet.
 Usage-based pricing of offered traffic to a data network can be an effective technique for congestion control. To gain insight into the benefits usage-based pricing offers, the authors propose and study a simple model in which many users wish to transmit packets to a single-server queue. Based on the announced price per packet and the available quality of service (QoS) (e.g., mean delay), each user independently decides whether or not to transmit. Given statistical assumptions about the incoming traffic streams and the QoS as a function of offered load, the equilibrium relationship between price and QoS is determined by a fixed-point equation. The relationships among price, QoS, revenue, and server capacity are illustrated numerically, assuming a particular type of random user population. These examples indicate that adjusting the price to maximize revenue results in an efficient use of service capacity with an associated small mean delay.   Operators of multi?service networks require simple charging schemes with which they can fairly recover costs from their users and effectively allocate network resources. This paper studies an approach for computing such charges from simple measurements (time and volume), and relating these to bounds of the effective bandwidth. To achieve economic efficiency, it is necessary that usage?based charging schemes capture the relative amount of resources used by connections. Based on this criteria, we evaluate our approach for real traffic consisting of Internet Wide Area Network traces and MPEG?1 compressed video. Its incentive compatibility is shown with an example involving deterministic multiplexing, and the effect of pricing on a network's equilibrium is investigated for deterministic and statistical multiplexing. Finally, we investigate the incentives for traffic shaping provided by the approach. There are repeating patterns in the histories of communication technologies, including ordinary mail, the telegraph, the telephone, and the Internet. In particular, the typical story for each service is that quality rises, prices decrease, and usage increases to produce increased total revenues. At the same time, prices become simpler.The historical analogies of this paper suggest that the Internet will evolve in a similar way, towards simplicity. The schemes that aim to provide differentiated service levels and sophisticated pricing schemes are unlikely to be widely adopted.Price and quality differentiation are valuable tools that can provide higher revenues and increase utilization efficiency of a network, and thus in general increase social welfare. Such measures, most noticeable in airline pricing, are spreading to many services and products, especially high-tech ones. However, it appears that as communication services become less expensive and are used more frequently, those arguments lose out to customers' desire for simplicity.Flat rates are the simplest form of pricing. Although they have generally been regarded as irrational, and economically and socially undesirable, they have serious advantages. Consumers like them, and are willing to pay extra for them. Further, flat rates are extremely effective in stimulating usage, which is of advantage in a rapidly growing service like the Internet. We study revenue-maximizing pricing by a service provider in a communication network and compare revenues from simple pricing rules to the maximum revenues that are feasible. In particular, we focus on flat entry fees as the simplest pricing rule. We provide a lower bound for the ratio between the revenue from this pricing rule and maximum revenue, which we refer to as the price of simplicity. We characterize what types of environments lead to a low price of simplicity and show that in a range of environments, the loss of revenue from using simple entry fees is small. We then study the price of simplicity for a simple non-linear pricing (price discrimination) scheme based on the Paris Metro Pricing. The service provider creates different service classes and charges differential entry fees for these classes. We show that the gain from this type of price discrimination is small, particularly in environments in which the simple entry fee pricing leads to a low price of simplicity. This is a list of Frequently Asked Questions about usage-based pricing of the Internet. We argue that usage-based pricing is likely to come sooner or later and that some serious thought should be devoted to devising a sensible system of usage-based pricing. 