Trading Transport Resources of Communication Networks on Bandwidth

Trading Transport Resources of Communication Networks on Bandwidth Exchanges W. Stańczuk, J. Lubacz, E. Toczyłowski Warsaw University of Technology, Poland e-mail: w. stanczuk@tele. pw. edu. pl

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 2

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 Ø Bandwidth becomes a commodity Trading Transport Resources of Communication Networks on Bandwidth Exchanges 3

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) Ø Need for multilateral trade patterns – bandwidth exchanges Trading Transport Resources of Communication Networks on Bandwidth Exchanges 4

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, Rate. Xchange, 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 5

Challenges • Commoditization of bandwidth – lack of standards for bandwidth contracts and Qo. S • 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 6

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 7

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 8

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 9

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) [hd, Ed]: • hd - the maximal bandwidth capacity the buyer wants to purchase • Ed - the maximal acceptable unit price of bandwidth • sell offer e: a path [ye, Se] • ye - the maximal capacity the seller is willing to sell • Se - the minimal acceptable unit price of bandwidth Trading Transport Resources of Communication Networks on Bandwidth Exchanges 10

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 11

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

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 13

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 d 2: 2/5 B 1/5 d 1: 3. 5/5 A C • applying the model: – welfare: Q=7. 5 – bandwidth allocation: path ABC for d 1 B 5 A Trading Transport Resources of Communication Networks on Bandwidth Exchanges 5 C 14

Efficient allocation of network bottleneck resources • resources are allocated to buy offers that bring higher welfare in global scope A C – local offer d 3 not realized – welfare: Q=10 – bandwidth allocation: path AEFC for d 1, path BEFD for d 2 d 1: 4/5 1/5 5 5 1/5 d 3: 5 1. 5/10 E 1/10 5 5 1/5 B F 5 1/5 d 2: 4/5 D • the price for a bottleneck resource reflects its „network” value Trading Transport Resources of Communication Networks on Bandwidth Exchanges 15

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, subnetworks, resource bundles) – network multi-layer issues Trading Transport Resources of Communication Networks on Bandwidth Exchanges 16

Personal details: Name: Wojciech Surname: Stańczuk Company: Warsaw University of Technology E-mail: w. stanczuk@tele. pw. edu. pl Trading Transport Resources of Communication Networks on Bandwidth Exchanges 17