Can Bilateral ISP Peering Lead to Network-Wide Cooperative Settlement

The Internet includes thousands of Internet service providers (ISPs) which are interconnected to provide connectivity and service for end-users. Traditionally, the settlement between the ISPs are determined based on bilateral agreements that result from pair-wise negotiations. Although this settlement mechanism is intuitive and easy to implement, it does not encourage network- wide cooperation, as the bilateral charges typically do not lead to a fair division of revenue among all ISPs that are involved in carrying the same flows of traffic. This problem is getting more severe with various emerging new Internet business models. In this paper, we try to determine the existence and realizability of bilateral prices that can achieve fair revenue division among ISPs. In particular, we use Shapley value as the basis for deriving fair prices. Under a quite general topology and traffic model, we find that there exists prices that make the revenue division under bilateral settlement equal to that calculated under Shapley value. The corresponding "fair price" exhibits several nice and desirable characteristics. Moreover, it could be realized approximately.