Smart Data Pricing

Chapter 10Economic Models of Sponsored Content in Wireless Networks with Uncertain Demand

MATTHEW ANDREWS, ULAS OZEN, MARTIN I. REIMAN, and QIONG WANG

10.1 Introduction

One persistent trend in wireless communications in recent years is that demand for bandwidth is exploding, whereas revenue per subscriber is either flat or growing at a much slower rate. Hence, there is a mismatch between the amount of revenue coming in from the end users (EUs) of the network and the amount of investment that is required for wireless capacity to keep pace with demand.

Variable pricing and bundling are two traditional ways for revenue enhancement. In the first case (e.g. [1]), the service provider charges different fees for the same service provided at different times of day or different locations, effectively using pricing as a control device to fit demand within capacity while discriminating between users with different needs. In the second case, the service provider offers a single package that contains both high revenue-per-bit services and low revenue-per-bit services, and uses the gains from the former to cover the loss of the latter. The potential of either method ultimately rests on the pockets of EUs and, hence, is limited by the latter's budget.

In this chapter, we investigate an approach whereby the service provider can tap into an alternative source of revenue, originating from sales of advertisements or products and channelled by the content provider in the form of sponsorship of ...