Nonneutral network and the role of bargaining power in side payments

Representatives of several Internet access providers have expressed their wish to see a substantial change in the pricing policies of the Internet. In particular, they would like to see content providers pay for use of the network, given the large amount of resources they use. This would be in clear violation of the “network neutrality” principle that had characterized the development of the wireline Internet. Our first goal in this paper is to propose and study possible ways of implementing such payments and of regulating their amount. We introduce a model that includes the internaut’s behavior, the utilities of the ISP and of the content providers, and the monetary flow that involves the internauts, the ISP and content provider, and in particular, the content provider’s revenues from advertisements. We consider various game models and study the resulting equilibrium; they are all combinations of a noncooperative game (in which the service and content providers determine how much they will charge the internauts) with a cooperative one the content provider and the service provider bargain with each other over payments to one another. We include in our model a possible asymmetric bargaining power which is represented by a parameter (that varies between zero to one). We then extend our model to study the case of several content providers. We also provide a very brief study of the equilibria that arise when one of the content providers enters into an exclusive contract with the ISP.