Delivery Consolidation and Service Competition Among Internet Service Providers

Abstract

The infrastructure of the Internet, by and large, is maintained by Internet service providers (ISPs) that cater to regional customers and by Internet backbone providers (IBPs) that serve large organizations and ISPs. Some IBPs have recently branched into content delivery network (CDN) services; separately, other ISPs have started offering on-demand video streaming to compete with pure-play content providers. These developments have intensified the competition in both content delivery and media-streaming markets. For the content delivery market, we study the competition equilibriums by analyzing factors such as market share, cost structure, service pricing, and subscriber preference. Our approach helps identify conditions under which a content provider should choose an IBP over the incumbent CDN for content distribution. We also show how an IBP’s CDN venture affects its interconnection relationship with ISPs. For the streaming service market, we examine conditions under which a content provider would partner with an ISP to lower operating and marketing costs while providing a more streamlined subscriber experience. Analytically, our game-theoretical models can optimize key contracting and pricing strategies for multiple classes of service providers; empirically, insights derived from the proposed models have anticipated events that coincide with several recent developments in content delivery and streaming service markets.

Key words and phrases:

• content delivery network
• Internet service provider
• media streaming
• peering and transit
• service pricing

Acknowledgments

Jhih-Hua Jhang-Li gratefully acknowledges support from the National Science Council of Taiwan (Republic of China) under grant NSC 102-2410-H-266-007.

Notes

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Additional information

Notes on contributors

I. Robert Chiang

I. Robert Chiang is an associate professor of information systems at the Gabelli School of Business, Fordham University. He holds a Ph.D. in information systems from the University of Washington. His research interests are in IT portfolio and project management, information systems economics, and e-business strategy and design. His prior work has appeared in Communications of the ACM, Decision Support Systems, IEEE Transactions on Software Engineering, Information Systems Research, Information Technology and Management, INFORMS Journal on Computing, and Operations Research, among others.

Jhih-Hua Jhang-Li

Jhih-Hua Jhang-Li is an assistant professor in the Department of Information Management at Hsing Wu University, Taiwan. He received his B.S. degree in computer science and information engineering from the National Chung Cheng University and M.S. and Ph.D. degrees in information management from the National Chiao Tung University, Taiwan. His research interests include information systems strategy, economics of information systems, and e-business. His work has appeared in Decision Sciences, European Journal of Operational Research, and Information Technology and Management, among others.