Time dependent pricing in wireless data networks: Flat-rate vs. usage-based schemes

Abstract

With the advances of bandwidth-intensive mobile devices, we see severe congestion problems in wireless data networks. Recently, research emerges to solve this problem from a pricing point of view. Time dependent pricing has been introduced, and initial investigations have shown its advantages over the conventional time independent pricing. Nevertheless, much is unknown in how a practical and effective time dependent pricing scheme can be designed. In this paper, we explore the design space of time dependent pricing. In particular, we focus on a number of schemes, e.g., the usage-based scheme, the flat-rate scheme, and a mixture of them which we called a cap scheme. Our findings include: 1) the ISP obtains a higher profit with usage-based (or flat-rate) scheme if the capacity is insufficient (or sufficient); 2) the usage-based scheme usually achieves a higher consumer surplus and more efficient traffic utilization than the flat-rate scheme; and 3) the cap scheme is strongly preferred by the ISP to further increase its revenue. We believe our findings provide important insights for ISPs to design effective pricing schemes.