Pricing Strategies for User-Provided Connectivity Services

User-provided connectivity (UPC) services offer a possible alternative, orcomplement, to existing infrastructure-based connectivity. A userallows other users to occasionally connect through its "home base" inexchange for reciprocation, or possibly compensation. This service modelexhibits strong positive and negative externalities. A large user basemakes the service more attractive, as it offers more connectivity options toroaming users, but it also implies a greater volume of (roaming) trafficpassing through a user's home base, which can increase congestion. Theseinteractions make it difficult to predict the eventual success of such aservice offering, and in particular how to effectively price it. This paperinvestigates a two-price policy where the first price is an introductory price that expires onceservice adoption reaches a certain level. The paper uses a simplifiedanalytical model to investigate pricing strategies under this policy, and their sensitivity to changesin system parameters. The insight and practicalguidelines this yields are validated numerically under morerealistic conditions.