Network neutrality debate and ISP inter-relations: traffic exchange, revenue sharing, and disconnection threat

The network neutrality debate originally stems from the growing traffic asymmetry between ISPs, questioning the established peering or transit agreements. That tendency is due to popular content providers connected to the network through a single ISP whose traffic is not charged by distant ISPs. We propose in this paper to review the economic transit agreements between ISPs in order to determine their best strategy. We define a model with two ISPs, each providing direct connectivity to a fixed proportion of the content and competing in terms of price for end users, who select their ISP based on the price per unit of available content. We analyze and compare thanks to game-theoretic tools three different situations: the case of peering between the ISPs, the case where ISPs do not share their traffic (exclusivity arrangements), and the case where they fix a transfer price per unit of volume. Our results suggest that a minimal regulation, consisting in letting ISPs choose transit prices but imposing peering in case no agreement is reached, leads to satisfying outcomes in terms of user welfare while still leaving some decision space to ISPs, hence answering a concern they have regarding regulation in the Internet market. Copyright Springer Science+Business Media New York 2014