A game–theoretic analysis of the implications of overlay network traffic on ISP peering

Inter-ISP traffic flow determines the settlement between ISPs and affects the perceived performance of ISP services. In today’s Internet, the inter-ISP traffic flow patterns are controlled not only by ISPs’ policy-based routing configuration and traffic engineering, but also by application layer routing. The goal of this paper is to study the economic implications of this shift in Internet traffic control assuming rational ISPs and subscribers. For this purpose, we build a general traffic model that predicts traffic patterns based on subscriber distribution and abstract traffic controls such as caching functions and performance sensitivity functions. We also build a game–theoretic model of subscribers picking ISPs, and ISPs making provisioning and peering decisions. In particular, we apply this to a local market where two ISPs compete for market share of subscribers under two traffic patterns: “Web” and “P2P overlay”, that typifies the transition the current Internet is going through. Our methodology can be used to quantitatively demonstrate that (1) while economy of scale is the predominant property of the competitive ISP market, P2P traffic may introduce unfair distribution of peering benefit (i.e. free-riding); (2) the large ISP can restore more fairness by reducing its private capacity (bandwidth throttling), which has the drawback of hurting business growth; and (3) ISPs can reduce the level of peering (e.g. by reducing peering bandwidth) to restore more fairness, but this has the side-effect of also reducing the ISPs’ collective bargaining power towards subscribers.