How Paradoxical Is the “Paradox of Side Payments”? Notes from a Network Interconnection Perspective

Abstract

The world of content provisioning over IP-based networks is currently undergoing a significant change, as Content Providers (CPs) have started to connect directly to Network Service Providers (NSPs) or even operate networks on their own. The resulting novel network architectures pose several fundamental economical challenges, for instance with respect to incentives for traditional network operators to offer Internet access to large Over-The-Top (OTT) providers. In this paper, we discuss these challenges from a techno-economic perspective, with an emphasis on new business and charging models. We focus on the so-called “Paradox of Side Payments”, an important property for charging frameworks enabling more sophisticated cooperation with OTTs. After briefly revisiting the paradox itself, we critically discuss its underlying assumptions. Based on a numerical analysis, we point out limitations of the model, including aspects of applicability for commercial scenarios and future business models. A summary of the main results concludes the paper.

The research leading to these results has received funding from the European Community’s Seventh Framework Programme (FP7/2007-2013) under grant agreement n $\mathring{ }$ 248567 for the ETICS project. Further information is available at www.ict-etics.eu. Additional support from the Austrian government and the City of Vienna in the context of the COMET program as well as from the EU Marie Curie program in the framework of the RBUCE WEST International Research Chair on “Network-based Information and Communication Ecosystems (NICE)” is gratefully acknowledged. The authors would like to thank their colleagues from the ARC MENEUR project for helpful discussions.