A comparative study of pricing strategies for IP telephony

This paper we present a comparative study of a few simple but representative usage-based pricing strategies. For the current best-effort Internet, we introduce a QoS sensitive pricing mechanism which takes into account the fact that the quality of received audio degrades as the number of hops traversed by the audio packets increases. We compare the QoS sensitive pricing with flat pricing, congestion sensitive pricing, and a hybrid scheme that combines QoS sensitive and congestion sensitive pricing schemes. Our study is based on a two class user model; type 1 users pay any price for the best QoS and type 2 users request the best QoS at a cost that is less than some maximum price they are willing to pay. Experimental results show the following: i) The QoS sensitive pricing has the lowest blocking probability and also the lowest service distance (the average distance between the client and the servicing gateway) for type 1 calls of any of the schemes. However, it does so by forcing type 2 calls away from the home gateway and hence gives a lower QoS to these calls. ii) The congestion sensitive pricing scheme adapts to the current load at a gateway and hence is good at providing a low service distance to type 2 calls. Unfortunately, it does this by increasing the blocking probability of a type 2 call. iii) The combination of congestion sensitive and QoS sensitive pricing is quite effective and incorporates the best elements of both schemes: it has a very low blocking probability (close to that of QoS sensitive pricing) while retaining a low service distance of type 2 calls. However, at very high loads, the correlation between price and distance breaks down resulting in an increase in the service distance of type 1 calls.