Dynamic pricing in mobile communication systems

The mobile cellular telephony market has expanded rapidly over the past decade. In the UK, at the end of the first quarter of 1999, mobile phone penetration was almost 30%-up by 5% compared to the end of 1998. This rapid growth has been mainly due to aggressive marketing and the level of competition between service providers, which led to a reduction in call charges. In turn, the increased demand for network services has led to substantial investments in the network infrastructure. Given that the radio frequency band allocated to GSM and UMTS is limited, the obvious solution to increase available capacity is through cell splitting and frequency re-use, resulting in smaller cell clusters. A certain degree of flexibility in handling the number of available channels per cell could be achieved by either: moving capacity between cells (dynamic channel allocation). Another option for optimising the available network capacity is alternate routing. In this context, real-time or dynamic pricing (the variation of tariff according to system utilisation) could potentially provide an additional strategy for efficient use of available scheme. This article begins with a literature review of applications of dynamic pricing in fixed telephony and other industries. Then an algorithm for the application of dynamic pricing to cellular networks is suggested and a model depicting user behaviour is presented. Finally, results from a set of simulations, incorporating a user behaviour model are presented.