A theory of cloud bandwidth pricing for video-on-demand providers

Current-generation cloud computing is offered with usage-based pricing, with no bandwidth capacity guarantees, which is however unappealing to bandwidth-intensive applications such as video-on-demand (VoD). We consider a new type of service where VoD providers, such as Netflix and Hulu, make reservations for bandwidth guarantees from the cloud at negotiable prices to support continuous media streaming. We argue that it is beneficial to multiplex such bandwidth reservations in the market using a profit-making broker while controlling the performance risks. We ask the question—in such a market, how much should each VoD provider pay for bandwidth reservation? We prove that the market has a unique Nash equilibrium where the bandwidth reservation price for a VoD provider critically depends on its demand correlation to the market. Real-world traces verify that our theory can significantly lower the market price for cloud bandwidth reservation.