Trading Transport Resources of Communication Networks on Bandwidth Exchanges W. Stańczuk, J. Lubacz, E. Toczyłowski Warsaw University of Technology, Poland

Trading Transport Resources of Communication Networks on Bandwidth Exchanges 2 Outline Current bandwidth trade patterns Bandwidth exchanges: opportunities and challenges A model for trading bandwidth links and paths Features of the model Summary

Trading Transport Resources of Communication Networks on Bandwidth Exchanges 3 Bandwidth as a traded good Evolution of telecom market: –increased number of players –different business roles and models (network operators, service providers, content providers, etc.) Changing network architecture (NGN) –connectivity layer  Bandwidth becomes a commodity

Trading Transport Resources of Communication Networks on Bandwidth Exchanges 4 Bilateral trading – the still prevailing model Drawbacks: –time consuming negotiations –significant market players can extort better conditions –difficulties in trading complex bandwidth products (e.g. sub-networks)  Need for multilateral trade patterns – bandwidth exchanges

Trading Transport Resources of Communication Networks on Bandwidth Exchanges 5 Bandwidth exchanges Marketplaces for many buyers and sellers –exchange operator matches offers in an „optimal” way –opportunity for fast and transparent contracting –wide range of possible organizational forms First real-world implementations: –late 90’: Band-X, RateXchange, Enron Communications –Arbinet (500 active clients), Merkato (real-time IP bandwidth trading) –traded products: network links (SONET/SDH, voice minutes, IP transit)

Trading Transport Resources of Communication Networks on Bandwidth Exchanges 6 Challenges Commoditization of bandwidth –lack of standards for bandwidth contracts and QoS Fast bandwidth delivery –automated switching in transport networks (GMPLS/ASON) not ubiquitous Exchange models –principles of bandwidth pricing still fuzzy –fuzzy business models for trading bandwidth products

Trading Transport Resources of Communication Networks on Bandwidth Exchanges 7 A new model for market offer matching is proposed an application of general multi-commodity trade model to communications networks description of operations of a bandwidth exchange provides optimal bandwidth allocation between many buyers and sellers

Trading Transport Resources of Communication Networks on Bandwidth Exchanges 8 Essential features of the proposed model (1) Traded commodities: –network links (sell) –network paths (buy) Bandwidth allocation criteria: maximization of market welfare

Trading Transport Resources of Communication Networks on Bandwidth Exchanges 9 Essential features of the proposed model (2) Bandwidth offered for sale can be allocated to many network paths Demanded bandwidth can be realized in the form of many network paths Exchange operator sets paths according to current offers Bandwidth allocation principle: –joint optimization of many elementary buy and sell offers in order to maximize market welfare (multi-commodity optimization)

Trading Transport Resources of Communication Networks on Bandwidth Exchanges 10 The model the commodities are expressed as elementary market offers with two parameters: –bandwidth capacity –offer price buy offer d: a link (or a path regarded as a link) [h d,E d ]: h d - the maximal bandwidth capacity the buyer wants to purchase E d - the maximal acceptable unit price of bandwidth sell offer e: a path [y e,S e ] y e - the maximal capacity the seller is willing to sell S e - the minimal acceptable unit price of bandwidth

Trading Transport Resources of Communication Networks on Bandwidth Exchanges 11 Market clearing principle Market welfare: sum of surplus of all market transactions –global optimality and individual rationality –a transaction: bandwidth contract between one sell offer with one buy offer –the welfare can be expressed as: (total offered value of bandwidth bought) - (total offered value of bandwidth sold):

Trading Transport Resources of Communication Networks on Bandwidth Exchanges 12 The formulation of the model

Trading Transport Resources of Communication Networks on Bandwidth Exchanges 13 Features of the model maximizes the global economic welfare: for given offers, no better allocation of bandwidth resources is possible (criteria: market welfare) „transparency” and fairness conditions of clearing any competitive (giving higher welfare) offer is always selected for realization mathematical formulation of the problem is linear, thus tractable even for large networks

Trading Transport Resources of Communication Networks on Bandwidth Exchanges 14 Trading paths and links vs only links: higher welfare buy and sell offers only for links: –welfare: Q=5.0 –bandwidth allocation: path AB for d2 applying the model: –welfare: Q=7.5 –bandwidth allocation: path ABC for d1 A C d1: 3.5/5 B d2: 2/5 1/5 A C B 5 A C B 55

Trading Transport Resources of Communication Networks on Bandwidth Exchanges 15 Efficient allocation of network bottleneck resources resources are allocated to buy offers that bring higher welfare in global scope –local offer d3 not realized –welfare: Q=10 –bandwidth allocation: path AEFC for d1, path BEFD for d2 the price for a bottleneck resource reflects its „network” value d3: 1.5/10 A C d1: 4/5 B D d2: 4/5 EF 1/5 1/10 A C B D EF

Trading Transport Resources of Communication Networks on Bandwidth Exchanges 16 Summary The presented model: –allocates bandwidth offered by many sellers to many buyers balancing market supply and demand –provides optimal market welfare –is linear, so tractable even for large-scale networks Future extensions of the model needed –capacity modularity –complex bandwidth offers (e.g. bandwidth capacity in some range, sub- networks, resource bundles) –network multi-layer issues

Trading Transport Resources of Communication Networks on Bandwidth Exchanges 17 Personal details: Name: Surname: Company: Wojciech Stańczuk Warsaw University of Technology