On the Impact of Billing Cycles on Compensations in Network SLAs

Network connections in optical backbone networks are subject to failures and the network operator is obliged to compensate its customers according to the terms of the service level agreement (SLA) if outages have occurred. These compensations are typically made after regular billing cycles. In most SLAs the billing cycle has a length of one calendar month. However, the length of the billing cycle has a significant impact on the compensation that is to be paid by the network operator. To show this, we first derive the exact distribution of the downtime per billing cycle for dedicated path-protected connections with exponential failure and repair times. Based on this, we derive the expected amount of compensation for different SLA compensation policies. We show that, depending on the failure and repair characteristics of the network components, there is a billing cycle for which the expected amount of compensation is maximized and hence is to be avoided. Consequently, the adjustment of the billing cycle to the failure and repair characteristics or vice versa can play an important role in the optimal design of SLAs.