Capacity Expansion of Neutral ISPs via Content Peering Charges: The Bargaining Edge

Many internet service providers (ISPs) operate under network neu-trality regulations which forbid smart data pricing schemes such asthose that provide differential QoS or differential pricing, leading tolower profitability. Increasing bandwidth-hungry content is mak-ing the consumers demand improved ISP infrastructure. With therisk of poor consumer experience squarely on the ISP, the ISPs areforced to invest in their infrastructure with little scope for moneti-sation via innovative user pricing. And they are asking the contentproviders (CPs) to pick up some of the tab for ISP capacity expan-sion. In this paper we explore the possibility of network neutralcapacity expansion sponsored by voluntary peering charges fromCPs.We consider the scenario where CPs peer with an ISP and takethe lead in paying peering charges with the caveat that this hasto be used for capacity expansion. Since ISP capacity expansioncan benefit all the CPs, and possibly even the ISP, selfish CPs willdetermine their charges strategically. We consider three models forthe CPs to interact in determining the charge—a cooperative model,a non-cooperative model, and a bargaining model. Our analysis re-veals a rather surprising result. We show that the bargaining modelleads to a higher investment in the ISP infrastructure than eventhe cooperative model. This leads us to recommend policies thatpromote transparency in the interconnection agreements betweenCPs and ISPs.