Pricing for Efficient Traffic Exchange at IXPs

We analyze traffic exchange between Internet Service Providers (ISPs) at an Internet Exchange Point (IXP) as a non-cooperative game with ISPs as self-interested agents. Each ISP has the choice of exchanging traffic either using the shared IXP facilities, or outside the IXP – through their transit providers or private peering. We analyze the efficiency (social cost optimality) of the traffic exchange equilibrium at the IXP taking into consideration the congestion cost experienced by the ISPs at the IXP. To model both non-profit and for profit IXPs, we consider several cases, i) where the IXP does not charge any price to ISPs for the traffic exchanged (zero pricing), ii) when it charges a price that is proportional to the aggregate level of congestion at the IXP (proportional pricing), and iii) when it charges a constant price per unit traffic (constant pricing). Further, we also analyze the profit earned by the IXP under these pricing policies, under two different models of the congestion cost (delay) functions. Simulations conducted using data for actual IXPs obtained from PeeringDB demonstrate that the theoretical bounds derived for social cost and profit optimality at equilibrium (measured as the Price of Anarchy) are fairly tight, and correctly capture the performance trends against the variation of key model parameters. Further, the results show that for proportional pricing, there is an operating price range that attains near-optimal social cost and near-optimal IXP profit
simultaneously
. We also demonstrate - through both theoretical analysis and simulations - that as compared to zero and constant pricing policies, proportional pricing attains better tradeoff between social cost and IXP profit, and also results in a performance that is more robust to price variations.