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From Packet-Switching to Contract-Switching

From Packet-Switching to Contract-Switching. Aparna Gupta Shivkumar Kalyanaraman Rensselaer Polytechnic Institute Troy, NY Murat Yuksel University of Nevada – Reno Reno, NV. Motivation. Implied Challenges. flexibility in time: forward/option pricing. Current problems:

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From Packet-Switching to Contract-Switching

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  1. From Packet-Switching to Contract-Switching Aparna Gupta Shivkumar Kalyanaraman Rensselaer Polytechnic Institute Troy, NY Murat Yuksel University of Nevada – Reno Reno, NV FIND Meeting, 2007

  2. Motivation Implied Challenges flexibility in time: forward/option pricing • Current problems: • 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 flexibility in space: user-defined inter-domain routes capability to provide e2e higher quality services money-back guarantees, risk/cost sharing FIND Meeting, 2007

  3. ISP B ISP A ISP B ISP C routable datagrams ISP A ISP C ISP B contracts overlaid on routable datagrams ISP A ISP C Contract-switching: A paradigm shift… Circuit-switching e2e circuits Packet-switching Contract-switching FIND Meeting, 2007

  4. 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-to-edge intra-domain paths • Contract components • Performance component • Time component • Financial component FIND Meeting, 2007

  5. A Contract-Switched Network Core • Contracts: a practical way to manage “value flows” • Technologies to support QoS • Economic considerations for service definition and delivery • Scalability, Efficiency and Fairness • Contract timescales • Cost recovery • Pricing the risk in QoS guarantees • Single-domain and end-to-end contracts FIND Meeting, 2007

  6. Pricing End-to-end QoS Contracts • End-to-end contract characterized by • source-destination (s-d) pair • other specifications, eg. QoS specs, contract duration • Two-component pricing model (Pe = Pbw + l V*) • 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 FIND Meeting, 2007

  7. Pricing Bandwidth for Cost Recovery • Nonlinear pricing model to recover provider’s 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: FIND Meeting, 2007

  8. Pricing of Risk in End-to-end QoS Guarantee • Single-domain contracts stitched to create end-to-end QoS assured contracts • Risks in end-to-end QoS assurance from • Constituent contracts • Stitch nodes • Risk management using pricing • Contract with N ISPs • Intra-domain contracts specified with • End-to-end contract • Definition of end-to-end contract (QoS assurance) • Pricing strategies FIND Meeting, 2007

  9. Model for Pricing Risk in End-to-end QoS • Price specified by contract: • s—d pair • QoS (Loss) guarantee • Temporal characteristics, etc • determined by lowest priceover all likely concatenations to deliver between s—d pair FIND Meeting, 2007

  10. 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 FIND Meeting, 2007

  11. Thank you! Questions/Comments? FIND Meeting, 2007

  12. Definition of End-to-end Loss Guarantee • Type of contract The per minute loss rate of the customer’s data over contract duration T starting from t0 does not exceed • Constituents of end-to-end loss • Definition of end-to-end loss guarantee FIND Meeting, 2007

  13. Pricing of Risk in Loss Guaranteed Intra-domain 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 Ratelt: • Provision of loss based QoS guaranteed services is risky. • Due to the uncertainties caused by the competing traffic. • Outcome of loss process in favor of or against the provider. FIND Meeting, 2007

  14. Pricing of Risk in Loss Guaranteed Intra-domain Services • Payoff defined as where is the upper barrier (provider’s promised loss rate guarantee),and is the indicator function defined as • Price for the risk: where -- total number of minutes of the contract duration, -- the risk neutral measure from provider’s SPD. FIND Meeting, 2007

  15. Pricing of Risk Using State Price Density • Price of Risk needs to be assigned for unhedgeable risk. • State Price Density (SPD) (3) • SPD describes a representative provider’s preferences for the future outcomes of the loss process. • Assumptions of the provider’s 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: • A monotonously decreasing SPD. • A SPD peaking at a positive loss rate. FIND Meeting, 2007

  16. Constructing a State-Price Density 5c 5/6 0 Mb p1 p2 1c 1/6 1 Mb p3 0c 0/6 100 Mb 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. FIND Meeting, 2007

  17. Sample Choice of State-Price Densities • Study price evolutions with different • SPD’s • Network settings • Capacity • Customer’s traffic It • the Aggregate At • Sample SPD’s 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) FIND Meeting, 2007

  18. Price Variations with Different SPD’s • A decreasing SPD (SPD 1) produces performancebased prices. • A SPD that does not reward zero losses produces congestion sensitive prices. • Among the beta SPD’s, the SPD that rewards higher for smaller losses is more favorable to the provider. FIND Meeting, 2007

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