From Packet-Switching to ContractSwitching

Aparna Gupta
Shivkumar Kalyanaraman
Rensselaer Polytechnic Institute
Troy, NY

Murat Yuksel
University of Nevada Reno
Reno, NV
June 27, 2007

FIND Meeting, 2007

Motivation

Implied Challenges

Current problems:

June 27, 2007

Users cannot express

value choices at
sufficient granularity
only at access level
Providers do not have
economic knobs to
manage risks involved in
investing innovative
QoS technologies and
business relationships
with other providers

FIND Meeting, 2007

flexibility in time:
forward/option
pricing
flexibility in space:
user-defined interdomain routes

capability to
provide e2e higher
quality services
money-back
guarantees,
risk/cost sharing
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Contract-switching: A paradigm shift

Circuit-switching

ISP
A

e2e circuits

ISP
A

Packet-switching

ISP
B

ISP
C
ISP
B

routable
datagrams

ISP
C

Contract-switching

ISP
A

ISP
B

ISP
C
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FIND Meeting, 2007

contracts
overlaid on
routable
datagrams
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Basic Building Block: Intra-domain dynamic

contracts

An ISP is abstracted as a set

of contract links
Contract link: an advertisable
contract
between peering/edge
points i and j of an ISP
with flexibility of advertising
different prices for edge-toedge intra-domain paths
Contract components
Performance component
Time component
Financial component

June 27, 2007

FIND Meeting, 2007

A Contract-Switched Network Core

Contracts: a practical way to

manage value flows
Technologies to support
QoS
Economic considerations for
service definition and
delivery

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Scalability, Efficiency and

Fairness
Contract timescales
Cost recovery
Pricing the risk in QoS
guarantees
Single-domain and end-to-end
contracts
FIND Meeting, 2007

Pricing End-to-end QoS Contracts

End-to-end contract characterized by

Two-component pricing model (Pe = Pbw + l V*)

source-destination (s-d) pair

other specifications, eg. QoS specs, contract duration
Pbw component for cost recovery (single domain and e-2-e)
V* component for risk management of QoS assurance
l provides appropriate scaling between Pbw and V*
Balance between customer demand for vanilla bandwidth and
additional QoS assurance
Determined by cross sensitivity between demand for vanilla
bandwidth and additional QoS guarantees

Develop to handle complexity and offer efficiency - improve

profitability, risk sharing, customer welfare, and utilization

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FIND Meeting, 2007

Pricing Bandwidth for Cost Recovery

Nonlinear pricing model to recover providers cost

Bandwidth purchase cost from constituent ISPs
Fixed cost to setup and maintain transit nodes
Price schedule responds to customer demand
Categorization based pricing for complexity management
Distance from s to d: hop counts h
Speed of traffic from s to d: bottlenecks b
Bandwidth pricing problem:

max Consumer Surplus + Revenues - Total Costs

s.t. Revenues Total Costs
June 27, 2007

FIND Meeting, 2007

Pricing of Risk in End-to-end QoS Guarantee

Single-domain contracts stitched to create end-toend QoS assured contracts

Risks in end-to-end QoS assurance from

Constituent contracts
Stitch nodes

Risk management using pricing

Contract with N ISPs

June 27, 2007

i
u
u i
Intra-domain contracts specified with t0 , Ti , Gi ,Vi (Gi , t0 , Ti )
u
u
End-to-end contract t0 , T , G ,V (G , t0 , T )

Definition of end-to-end contract (QoS assurance)

Pricing strategies
FIND Meeting, 2007

Model for Pricing Risk in End-to-end QoS

Price V * ( S ) specified by contract:

sd pair
QoS (Loss) guarantee S u
Temporal characteristics, etc

V *( S u ) determined by lowest price over all likely

u
concatenations to deliver S between sd pair
min min
u

rbh { Si , r ,VN }

s.t.

Vi ( Siu,r ) VN

Siu,r S u ,N S u

ipath r

ipath r

Siu,r , S u ,N 0
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FIND Meeting, 2007

Putting it together Contract switching,

Routing, Financial Engineering

End-to-end QoS services

Contract Routing
Pricing
Risk management tools

Spot contracts
Forward contracts
Options on Forward

Flexibility to innovate
services

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FIND Meeting, 2007

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Thank you!

Questions/Comments?

June 27, 2007

FIND Meeting, 2007

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Definition of End-to-end Loss Guarantee

Type of contract
The per minute loss rate of the customers data over contract
u
u
duration T starting from t0 does not exceed Si ( S ).

Constituents of end-to-end loss

l li ,contract l Nj ,contract
i

Definition of end-to-end loss guarantee

S u S u ,N

icontract

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FIND Meeting, 2007

Siu
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Pricing of Risk in Loss Guaranteed Intradomain Services

Sample Contract:
The per minute maximum loss rates are less than 0.5% (Siu)
over the contract duration of 1 hour.
Per Minute Loss Rate lt:

60

li ,t

j 1
60

Lt , j

j 1 t , j

Provision of loss based QoS guaranteed services is risky.

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Due to the uncertainties caused by the competing traffic.

Outcome of loss process in favor of or against the provider.
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Pricing of Risk in Loss Guaranteed Intradomain Services

Payoff defined as

Yt I (0,1) (lt ) lt S u ,

where S u 0.5% is the upper barrier (providers promised loss

rate guarantee), and I(0,1) is the indicator function defined as

1, if lt S u ;
I (0,1)
0, otherwise.

Price for the risk:

N
Vo EQ I (0,1) (lt ) lt S u
0

where N -- total number of minutes of the contract duration,

Q -- the risk neutral measure from providers SPD.
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FIND Meeting, 2007

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Pricing of Risk Using State Price Density

Price of Risk needs to be assigned for unhedgeable risk.

State Price Density (SPD)
ps
qs
,
(3)
k pk
where ps is the state price.

SPD describes a representative providers preferences for

the future outcomes of the loss process.
Assumptions of the providers preference:

The provider would expect losses to be rare events.

The provider would not get rewarded for large losses.

Two alternative forms of SPD functions:

June 27, 2007

A monotonously decreasing SPD.

A SPD peaking at a positive loss rate.
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Constructing a State-Price Density

p1

0 Mb

5c

5/6

1 Mb

1c

1/6

100 Mb

0c

0/6

p2

p3

T=0

T=1

Ten such time steps with (8, 1, 1) realization of each outcome imply a value of
8*5/6 + 1*1/6 + 1*0/6 = 41/6.

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Sample Choice of State-Price Densities

Study price evolutions with
different
SPDs
Network settings

Capacity
Customers traffic It
the Aggregate At

Sample SPDs
SPD 1: Exp(0.02)
SPD 2: Beta(1.5, 100.5)
SPD 3: Beta(1.5, 167.2)
SPD 4: Beta(1.05, 100.95)
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FIND Meeting, 2007

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Price Variations with Different SPDs

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FIND Meeting, 2007

A decreasing SPD (SPD 1)

produces performance
based prices.
A SPD that does not
reward zero losses
produces congestion
sensitive prices.
Among the beta SPDs,
the SPD that rewards
higher for smaller losses
is more favorable to the
provider.
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