A New Bilateral Arrangement between Interconnected Providers

Ruzana Davoyan (), Jörn Altmann and Wolfgang Effelsberg
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Wolfgang Effelsberg: Technology Management, Economics, and Policy Program (TEMEP), Seoul National University

No 201044, TEMEP Discussion Papers from Seoul National University; Technology Management, Economics, and Policy Program (TEMEP)

Abstract: Cost allocation between interconnected networks is based on measured traffic flows. This principle, however, does not provide a fair way for sharing costs. In this paper, a new bilateral model, called Differentiated Traffic-based Interconnection Agreement (DTIA) for intercarrier compensation is presented. In particular, the approach aims to determine the original initiator of a transmission by means of traffic differentiation into two types and to compensate the interconnection costs. Unlike the existing financial settlements, under which the payments are made based on the traffic flows, the proposed method suggests costs compensation according to the differentiated traffic flows. Further, in order to support the described payment scheme, a simple and scalable traffic management mechanism was designed. The results obtained from the comparative analysis showed that determination of a transmission initiator induces cost sharing between all parties and therefore, reduces the interconnection payments between providers.

Keywords: Interconnection arrangement; intercarrier compensation; Internet economics; charging; pricing; peering agreements; transit agreements (search for similar items in EconPapers)
JEL-codes: C61 C62 C70 D40 D45 D86 L14 L86 L96 M15 M21 (search for similar items in EconPapers)
Pages: 17 pages
Date: 2010-01, Revised 2010-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published in ICQT 2009, 6th International Workshop on Internet Charging and QoS Technologies, Aachen, Germany, May 2009

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Persistent link: https://EconPapers.repec.org/RePEc:snv:dp2009:201044

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