Economic feasibility of bandwidth-sharing service with quality of service guarantees

Recent progress in quality-of-service (QoS) differentiating technology in communication networks has led to the emergence of a new type of leased-line service – bandwidth-sharing service with QoS guarantees. This service allows customers to share common bandwidth resources, while it also guarantees the contracted QoS for each customer. In bandwidth-sharing services, each customer is usually charged based on the amount of data transferred, while, in the conventional bandwidth-dedicated services, each customer is charged based on the amount of reserved bandwidth. Thus, if the QoS is guaranteed, bandwidth-sharing services would be more economically attractive than conventional bandwidth-dedicated services from the customer's viewpoint. In contrast, the profitability of bandwidth-sharing services for network service providers is more complicated: the introduction of bandwidth-sharing services would increase the number of customers by the use of statistical multiplexing. The charge paid by each customer, however, would decrease. The balance between these factors will determine whether bandwidth-sharing services are economically attractive for network service providers. With these points in mind, we discuss the economic feasibility of bandwidth-sharing services from the viewpoints of both customers and network service providers. We assume that a bandwidth-sharing-service customer using bandwidth x in average is charged f(x) per unit time, and that a bandwidth-dedicated-service customer reserving bandwidth x is charged g(x) per unit time. Upon these assumptions, we mathematically clarify the conditions for f(x) and g(x), under which the bandwidth-sharing-service is economically attractive. First, we show that g(x) being continuous with g(x)≤f(x) is the sufficient condition for the economical attractiveness from the customer's viewpoint. Next, we show that g(x)/x being a decreasing function with f(x)≤g(x) is the sufficient condition for the economical attractiveness from the network service provider's viewpoint. Based on the derived conditions, we then analyze the current charge functions for high-speed digital leased lines and asynchronous transfer mode leased lines to reveal that the economical feasibility of the introduction of bandwidth-sharing services largely depends on the extent of the correlation between each customer's traffic. That is, if the correlation is small, the bandwidth-sharing services are economically attractive, but if the correlation is large, network service providers might have no economic incentive to introduce bandwidth-sharing services.