On the Interaction and Competition among Internet Service Providers

In this work, we seek to understand the interaction between different tiers of ISPs. The lower tier ISPs can transmit traffic to each other, either by purchasing the service from higher tier ISPs, or by setting "private peering links" between themselves. Higher tier ISPs cannot charge the transit service at will since there is competition among higher tier ISPs. We model the interaction of these ISPs via a game theoretic approach. We study the issues of (a) impact of private peering relationship among the lower tier ISPs, (b) under a competitive market, how can the higher tier ISPs perform resource allocation and revenue maximization, (c) conditions wherein higher tier ISPs are willing to perform network upgrade, in particular, when we scale up the network. Our mathematical framework provides insights on the interaction among ISPs and shows these ISPs can still gain profits as they upgrade the network infrastructures.