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Monday, April 8, 2013

A Survey of Time-Dependent Pricing for Internet Access

The tremendous growth in demand for broadband data is forcing ISPs to use pricing as a congestion management tool. This changing landscape of Internet access pricing is evidenced by the elimination of flat rate data plans in favor of usage-based pricing by major wired and wireless operators in the US and Europe. But simple usage-based fees suffer from the problem of imposing costs on all users, irrespective of the network congestion level at a given time. 

To effectively reduce network congestion, appropriate incentives must be provided to users who are willing to time-shift their data demand from peak to off-peak periods. These pricing incentives can either be static (e.g., two-period daytime/nighttime prices) or computed dynamically (e.g., dayahead pricing, real-time pricing). Data plans that offer such incentives to consumers fall under the category of time-dependent pricing (TDP). Many ISPs across the world are currently exploring various forms of TDP to manage their traffic growth.

This article first outlines the sources of today’s challenges, and then discusses current trends from regulatory and technological perspectives. Finally, we review representative pricing proposals for incentivizing the time-shifting of data.


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