next up previous

A Dynamic Pricing Framework to Support a Scalable, Usage-based Charging Model for Packet-switched Networks

Mike Rizzo*, Bob Briscoe, Jérôme Tassel, Konstantinos Damianakis
Distributed Systems Group, BT Laboratories

February 1999

$\textstyle \parbox{5.5in}{
Keywords: usage-based charging, mobile...
.... Tel: ++44 1473 641456. Fax: ++44 1473 640929.

HTML Version (for browsing only)
Use PostScript version to generate hardcopy


The underlying objective of the work presented in this paper is to create an active multi-service network which uses pricing to manage supply and demand of resources. The paper describes a dynamic pricing framework designed to support a radical approach to usage-based charging for packet-switched networks. This approach addresses the scalability problem normally associated with usage-based charging by shifting responsibility for accounting over to customer systems, which are also assigned the task of applying tariffs to create a bill.

In this context, the role of the dynamic pricing framework is to enable a provider to establish `active tariffs' and communicate them to customer systems. These tariffs take the form of mobile code for maximum flexibility, and the framework uses an auditing process to provide a level of protection against incorrect execution of this code on customer systems. In contrast to many active networks proposals, the processing load is moved away from routers to the edge of the network.

1. Introduction

As the Internet continues to grow and evolve into a global, multi-service network, the issue of how to charge fairly and sensibly for network services is becoming increasingly relevant. The flat-rate charging model, currently used by virtually all ISPs worldwide, relies heavily on characteristics of the present best-effort Internet which may no longer be valid in the near future. For example, the inability of the present Internet to offer differential services means that it does not make sense to speak of higher prices for better services. And the bandwidth limitations associated with dial-up connections provide a convenient cap on resource usage by any one individual, thereby protecting providers' routers from being hogged by a single user at the expense of other users.

It is envisaged that the current best-effort Internet will gradually be replaced by a network that can offer differential levels of network service that are better suited to the indivial needs of specific applications. For example, a video-on-demand application might make use of a high-bandwidth, low-jitter, reservation-based service, whilst email would continue to use best-effort service. Furthermore, it is expected that access bandwidth for end-users will increase in order to enable the provision of high quality multimedia services.

In this scenario, the flat-rate charging model gives rise to the anomalous situation wherein users that make heavy demands on network resources are charged the same amount as users that make lighter demands. Moreover, the service offered to lighter demand users is likely to be impaired by the provision of services to higher demand users. This situation is likely to result in either (i) convergence back towards a single-service network where users will always request the best service possible, or (ii) denial of service to users whenever network resources are operating at maximum capacity.

It makes sense, therefore, to abandon flat-rate charging in favour of a usage-based model in which there is a relationship between price and resource usage. Indeed it is possible that such a model might also have been considered for the current best-effort Internet, were it not for the substantial increase in operational complexity involved. Whilst flat-rate charging is extremely easy to implement, usage-based charging requires that some form of usage accounting be carried out before a charge can be computed. It is generally accepted that the additional operational cost associated with such accounting is substantial due to the increase in processing power that is required, not only to cope with accounting processes as such, but also to compensate for the the blocking nature of the measurement process, which has a negative effect on throughput. Consequently usage-based models are not yet considered viable, and many proposals have focused on compromise solutions based on aggregation [BBC93,Cro96,Cla95,Kel97].

As part of a project investigating radical approaches for operational support systems, we are investigating the possibility of lowering the operational cost of usage-based charging by shifting responsibility for accounting to the users themselves. We propose that users measure their own traffic, and compute their own bills using tariffs supplied by the provider. This spreads the processing load and associated storage so that each processing unit uses a near-negligible amount of resources for billing purposes, all the more so when one considers that most users' machines spend much of their time in an idle state. It also gets round the blocking problem, allowing network routers to focus on their principal function without sacrificing throughput.

Using this approach it is possible to charge users differentially on the basis of both traffic generated and received, as well as the quality of service attached to this traffic. This gives providers a degree of control over resource usage, because tariff structures can be determined so as to give users an incentive to use the minimal amount of resources that meets their requirements.

Furthermore, finer-grain control over supply and demand management of network resources can be achieved by price variation along the lines of established economic supply and demand principles. At times when resources are in short supply, demand is curbed by raising service prices. Conversely, at times when resources are under-utilised, demand is stimulated by lowering prices. If the decision-making involved in changing prices is (partially) automated1, then the result is an intelligent active network which performs its own supply and demand management.

This approach immediately raises several questions, particularly with respect to trust, stability, security, and user acceptance. Some of these questions are briefly covered in sections 2 and 3, and are expanded on in another paper [B$^$99]. The principal focus of this paper, however, is the framework which enables a provider to communicate tariffs and price variations to its customers. This subject itself raises a number of questions:

The remainder of the paper focuses on addressing these issues. Following a broad overview of our approach to charging in section 2, section 3 outlines the issues of specific concern to tariff representation, dissemination, and application. Section 4 describes a prototype implementation that was developed to demonstrate the approach, and to gain experience in the choice of suitable implementation techniques and protocols. An illustration of the prototype in use is given in section 5, and section 6 follows with indications for further work. Finally section 7 concludes with some general implications for active networks.

2. Background

We assume a packet-switched network in which a variety of network services are made available to users. The exact nature of these services, and the specific characteristics that form the basis upon which they might be differentiated, are not important for our purposes, and may vary from one provider to another. However we assume that, in general, service usage may be measured on the basis of packet counts, and may be classified using some notion of quality of service, irrespective of whether this is reservation-based [BCS94] or class-based [B$^$98].

Figure 1: Radical charging model: processes and flow of information
\epsfig {,scale=0.5}\end{center}\end{figure}

In the proposed charging model, the customer system is responsible for accounting for usage under the instruction of the provider. The provider supplies tariffs for each of the available services, along with other information pertaining to their application e.g. how frequently they should be applied. The customer's system measures and categorizes both inbound and outbound traffic, applies the appropriate tariffs for each category of traffic, and periodically sends accounting reports back to the provider. The customer's system might also be responsible for making payments, although it is possible that some other entity will be responsible for payment. The various processes and information flows are depicted in figure 1.

This model clearly places a lot of trust in the customer system. Our view is that this does not pose a problem, as long as the provider is able to check up on a chosen sample of customers from time to time. For this reason an auditing function may be employed by the provider's accounting process to make measurements pertaining to a particular customer at the provider end, and verify that the customer's accounting reports tally with the observations made. Thus the provider system is burdened with measurement for only a small subset of its customers.

The model is not targeted solely at the edge of a packet network, but is intended to be applied recursively throughout the network. Thus an access provider might be the customer of a larger provider, which may in turn be the customer of a backbone provider. Conversely, a multi-host edge customer might employ a similar model within its network in order to recover costs. Clearly the tariffs offered by a provider are likely to be influenced by the tariffs offered to it by its own provider.

Whilst it is likely that charge for network use will be uni-directional at the edge of the network i.e. provider charges customer, this is not necessarily the case in general. The distinction between provider and customer becomes somewhat blurred as one approaches the core of the network. Additionally there is a charging issue related to the direction of traffic: should a chargeable entity pay for packets sent, packets received, or both? In the general case, there are four possible charging categories between any two entities A and B:

Using this framework we can argue that the same entity can assume the roles of both provider and customer with respect to some other entity. In addition we allow charging for any combination of the above to allow maximum flexibility with respect to traffic direction when establishing charging policies and tariffs.

Having outlined the general principles of our charging model, the next section focuses on the role of the tariffing subsystem and the nature of tariffs themselves.

3. The tariffing subsystem

The role of the tariffing subsystem is to enable:

In order to fulfil this role, the tariffing subsystem requires: This section characterizes the requirements for these components in order to set the scene for the next section, which describes our prototype implementation.

3.1 The nature of tariffs

We assume that a provider may set a separate tariff for each category of service that it offers, and that for a particular category of service, a tariff may change periodically. We do not exclude the possibility that a tariff may change frequently e.g. in response to changing traffic patterns. However, we distinguish between two kinds of change, namely replacing a tariff and adjusting a tariff. The former implies substitution of an old tariff by a new one, whilst the latter involves `tuning' an existing tariff. We envisage that tariff adjustments will occur more frequently than tariff replacements.

There is a clear distinction between `tariff' and `price'. A tariff is responsible for determining a price with respect to a set of given contextual parameters. It is therefore possible for a price to change without there being a change to the tariff that determines it. For example, a traditional PSTN tariff might offer one price for peak hours, and another price for off-peak hours. Here price varies according to the time of day, but the tariff remains constant.

Continuing with this example, a tariff adjustment might involve changing the off-peak price, or perhaps the times of day at which off-peak is considered to start. If an altogether different tariff structure is required e.g. due to the introduction of a new discount scheme, then a tariff replacement is required.

It is a goal of the model to allow maximum flexibility in the structure of tariffs. Ideally it should be possible for tariffs to be modelled on complex rules. For example, a provider may wish to deploy a tariff for best-effort traffic which operates such that customers are penalized if their systems do not back off in the presence of congestion. It is also desirable to put as much intelligence as possible into tariffs, so as to avoid frequent transmission of tariff changes to customers. This is particularly relevant at times when network congestion is high, in which case a tariff should be capable of making price adjustments without having to receive explicit instruction from the provider.

3.2 Supply and demand management

Our model allows on-the-fly changes to prices, and can be used to support to supply and demand management wherein prices fluctuate on the basis of current demand. This concept may come across as too radical to some. However it is worth pointing out that many people are quite happy to purchase variable rate mortgages, or invest in the stock market. And just as other people pay a fee for a fixed-rate mortgage, or are prepared to commit themselves to a safer long-term savings plan, it is quite conceivable that they will be prepared to pay for their price to be kept fixed, or for price variations to be constrained in accordance with some pre-defined contract. The notion that there may be different charging schemes for a given service category leads us to the concept of a product. For example, a product A might offer best-effort service at a fixed price, whilst another product B might offer best-effort service at a variable price.

It is envisaged that a provider will adjust product prices on the basis of observations it makes with respect to:

Price adjustments can be effected in one of three ways: The first of these is by definition an automated decision. The second may be performed both manually or by an agent that issues adjustments on the basis of observations made by the provider system. The third is likely to be performed manually, as replacement of a new tariff represents a major change in business strategy. In particular, creation of a new tariff involves an element of design which can only be sensibly carried out by a human with expertise in economics. However, it is possible that given the availability of a repertoire of tariffs, an agent might be employed to automatically switch tariffs for a product on the basis of a set of specified rules.

Given the possibility of frequent, on-the-fly changes, it is important that customers have some way of knowing what is going on. It is difficult to construct a customer user interface that can convey the workings of a tariff if the tariff is not known at the time the customer software is deployed. It is therefore desirable that the rules that define tariffs are accompanied by user interfacing suggestions that could somehow be used by the customer system 2.

4. Implementation

This section describes a prototype that we implemented to demonstrate the tariff subsystem outlined above. The key features of our design include:

The prototype consists of a library of general-purpose Java classes and two specific applications, namely: The provider system is intended to serve multiple instances of the customer system running on different hosts in a multicast-enabled network. A multicast announcement protocol is used to communicate tariff changes from the provider system to customer systems.

4.1 Tariff representation

In order to maximize flexibility with respect to the definition of tariffs, we chose to represent tariffs using Java classes. This technique also proved extremely useful for supplying custom-built user interface components to support visualisation of the behaviour of a tariff.

Figure 2: UML description of tariff definition framework
\epsfig {,scale=0.65}\end{center}\end{figure}

Figure 2 illustrates the framework within which tariffs are defined.

The Tariff interface acts as the base class for all tariffs. This defines a single operation getGUI() which returns a Java SWING component that can be incorporated into the customer's GUI. The intention is that this GUI component will enable the customer to visualise the behaviour of the tariff using the most appropriate user interfacing techniques for that tariff.

Subclasses of the Tariff interface establish a set of tariff types, each of which is associated with a different set of measurement and input parameters. These parameters are identified by listing them in the signature of the getCharge() method. For example, the interface RSVPTariff defines getCharge() as receiving an RSVP TSPEC, allowing for the definition of tariffs that compute price on the basis of the characteristics of an RSVP reservation [BLB98]. On the other hand, the interface PacketCountTariff defines getCharge() as receiving measurements of packets in, packets out, and current congestion (typically measured as a function of packet drop), allowing for the definition of tariffs that are dependent on packet counts and sensitive to congestion. Other tariff types may be added as new forms of usage-measurement emerge.

Tariffs are defined by providing implementations of the various tariff interfaces described above. For example, the tariff PacketCountLinear implements PacketCountTariff to compute charges in proportion to packet counts. Another tariff CongestionSensitiveLinear works on a similar basis, but adds a penalty charge if the customer does not stay within a specified traffic limit in the presence of congestion.

In addition to the tariff interface implementation, a tariff may make use of other `helper' classes to assist it in its operation, as well as one or more user interface component classes for customer visualisation purposes. A provider-side user interface may also be required in order to enable the provider to make tariff adjustments.

A complete tariff description then, consists of a set of Java classes, some of which are destined for the customer system and others which are intended for use by the provider system 3. The customer-side classes are bundled into a Java archive (JAR) file to facilitate processing by the provider system.

4.2 Tariff dissemination and adjustment

In order to deploy a new tariff, the provider system first loads the tariff classes which it requires into its execution environment. It then loads the customer-side bundle, serializes it, signs it with a private key, and uses an announcement protocol to distribute it to customer systems. The use of a signature makes it possible for customers to verify that received tariffs are authentic.

Upon receiving the bundle, each customer system verifies the signature (using the public key matching the provider's private key), unpacks the bundle, and loads the classes into its execution environment using a purpose-built dynamic class loader. An instance of the received tariff class is created and installed in place of the previous tariff. If the tariff has a user interface component (obtained by calling the tariff object's getGUI() method), then it replaces the user interface of the previous tariff. The change in user interface serves to notify the user that the tariff has changed.

Tariff adjustment involves the remote invocation of an operation which is specific to the tariff currently in force. This means that a customer system cannot know the signature of this operation in advance of receiving the tariff i.e. the operation will not be listed in any of the tariff interfaces known to the customer system.

In order to get around this problem, use is made of the reflection feature supported by Java. In order to disseminate a tariff adjustment, the provider creates an instance of an Invocation object, which stores the name of the operation to be called, together with the parameters that are to be supplied to it. This object is then serialized, signed, and announced using the announcement protocol. When an adjustment is received and verified by a customer system, the Invocation object is de-serialized and applied to the current tariff by using reflection to invoke the described operation.

In order to simplify the announcement protocol, adjustments are required to be idempotent and complete. Idempotency guarantees that a tariff will not be adversely affected if an adjustment is applied more than once. And completeness implies that an adjustment determines the entire parameter set of a tariff object, so that an adjustment completely removes the effects of any previously applied adjustments.

4.3 Tariff application

The customer system applies a tariff by repeatedly invoking the getCharge() operation supported by that tariff every second, and adding the returned value to the cumulative charge. The parameters supplied to getCharge() depend on the kind of tariff currently in force. For example, if the tariff is an implementation of PacketCountTariff, then measurements of inbound packets, outbound packets and congestion over the past second are required. However, if the tariff is an implementation of RsvpTariff, then only a TSPEC describing the current reservation is required4. This implies that a customer system can only subscribe to a product if it can supply the parameters required by the tariff associated with that product.

Each invocation of the getCharge() method also results in an update to the tariff-specific user interface. For example, in the CongestionSensitiveLinear tariff, the usage parameters supplied to getCharge() are used to update the graphical displays of traffic and congestion.

4.4 Announcement protocol

The announcement protocol is used to communicate serialized tariffs and adjustments from a provider system to multiple customer systems. The number of customer systems is assumed to be large, and a repeated multicast solution in the vein of SAP [Han96] is adopted.

Each product supported by a provider is assigned a multicast channel for announcement purposes. Customer systems listen to the channels corresponding to the products that they are using. In the current implementation, it is assumed that each customer system has knowledge of well-known multicast addresses for the products it is interested in.

For each product channel, the provider repeatedly announces the current tariff and the most recent adjustment made to it (if any). Each announcement carries a version number, which is incremented each time the announcement is changed. Customer systems only process announcements when a version number change is detected. If a new customer joins a channel, it waits until it receives a tariff before processing any adjustment announcements. Furthermore, an adjustment is only applied if its announcement version is greater than that of the current tariff, thereby ensuring that a missed tariff announcement does not result in the application of a subsequent adjustment to an old tariff.

5. Illustration

Figure 3: Customer interface
\epsfig {,scale=0.65}\end{center}\end{figure}

Figure 3 shows the user interface for the customer-system with the user interface component for the CongestionSensitiveLinear tariff embedded within it. The latter displays information about traffic and congestion levels, and indicates the traffic limits which must be observed when congestion is above a specified threshold. To the bottom right of the display, the formula used to compute the current price is displayed. In the case depicted, congestion is above the threshold and both incoming and outbound traffic are above their respective limits, with the result is that a congestion penalty of 0.2 is added to the price5.

The upper part of the customer user interface displays the current charge 6being applied (per second), and the total charge accumulated by the customer up till that point in time. The interface also allows the user to specify the path for the public key which is to be used for signature verification purposes, and shows details of the multicast address being listened to for announcements.

Figure 4: Provider interface
\epsfig {,scale=0.65}\end{center}\end{figure}

Figure 4 shows the user interface for the provider-system. This contains a window for each product supported by the provider. Each product is associated with a different multicast channel for announcement purposes.

The window labelled `Scheme 0' corresponds to the product being used by the customer system shown earlier. Appropriately, the lower part of the window contains the provider-side user interface component for the CongestionSensitiveLinear tariff embedded within it. Using this interface, the provider can manually adjust the parameters associated with the current tariff. Any adjustments are communicated to customer systems using the announcement protocol, and are immediately reflected in customer user interfaces.

The window labelled `Scheme 1' shows the interface for another product for which a reservation-based tariff is in force. Here the provider is able to specify a price per second per 64K reservation, currently set at 0.05.

The upper part of each product window allows the provider to replace the tariff currently associated with that product. Each tariff is fully described by a policy file7, which contains such details as a tariff name, a descriptive string, and more importantly the location of the JAR file on the provider's file system. Once a new policy file has been selected, the `Activate' button injects the corresponding tariff into the network, instantly replacing the existing tariff for that product.

6. Further work

To date we have focused primarily on the establishment of general principles related to dynamic pricing, and the technical infrastructure required to support these principles. However, we have not identified those specific configurations of the framework which are economically viable or socially acceptable. We believe that this can only be achieved by a combination of rigorous modelling, and experimentation with user trials.

We intend to continue to develop the existing infrastructure to the point where we can conduct user trials in order to gain experience with relevant human factors issues, and to guage user acceptance of the approach. We can also use this test-bed for experimenting with different tariffing schemes, although this will only be done after these schemes have been subjected to mathematical analysis.

We are currently working on improving on a number of aspects of our current implementation, particularly with respect to the announcement protocol. Currently this makes a number of assumptions which are not valid in general. For example, it assumes that a tariff will fit in a single datagram. At best this leads to a packet fragmentation problem, but at worst it means that larger tariffs cannot be announced. There is also a problem in that well-known announcement addresses are expected to be known in advance by customers. This does not give the provider any flexibility with respect to channel assignments e.g. the provider may wish to move a product to share a channel with another product if it observes that a large number of customers are using both products simultaneously. Last but not least, there are a host of timing issues which need to be addressed. At the moment it is not possible to give customers advance warning of an impending tariff change. There are also complications which arise due to the presence of multiple independent physical clocks.

7. Concluding remarks

The dynamic pricing framework described in this paper demonstrates an active network approach to demand and supply management of network resources. This is of substantial relevance to the debate over whether overprovisioning is likely to be more cost-effective than rationing of resources in a multi-service network [Odl98,BS98]. By lowering the operational cost of usage-based charging, and by providing an infrastructure within which resource rationing mechanisms can be adjusted and fine-tuned as required, many of the arguments against resource rationing are invalidated.

Additionally, our experience with the dynamic pricing framework has some interesting bearings on a number of more general issues in the area of active networks and the use of mobile code.

One important point relates to the fact that active networks need not rely solely on the processing capacity of provider equipment. In particular, for applications with high processing loads, it may be possible to shift much of this load right up to the very edge of network, using multicast technology for efficient deployment of mobile code. Furthermore, it may be possible to exercise some control over core network elements as a side-effect of mobile code deployed to the edge of the network. In this respect, the dynamic pricing framework provides an interesting contrast to mainstream thinking on active networks, where the emphasis is normally on deploying mobile code to network routers.

Another point relates to the well-known security problem concerning the protection of mobile code from malicious or erroneous execution platforms. The sample-based auditing approach adopted in our charging model does not represent a complete solution to this problem, but is a reasonable compromise which can detect some cases of abuse whilst acting as a deterrent in general.

The class loader used for introduction of mobile code in our protoype implementation of the customer system differs substantially from other approaches to dynamic loading of remote classes in Java, as exemplified by Bursell et al[BHDH98]. Instead of loading each class individually from a remote class repository using a request-reply `pull' protocol, we employ a `push' approach in which a bundle of classes is delivered to the receiver in a single transaction. The receiver can then load all the classes without having to access the network. This is useful in situations where the sender determines which classes the receivers should be loading, and has the advantages that the effects of network latency are minimized, and that multicast may be employed to push bundles to several receivers simultaneously.


Alan Smith, Richard Jacobs, Trevor Burbridge, Ben Strulo.


S. Blake et al.
An architecture for differentiated services.
Request for Comments (Proposed Standard) 2475, Internet Engineering Task Force, December 1998.

Bob Briscoe et al.
Lightweight, end to end usage-based charging for packet networks, 1999.
Submitted to SIGCOMM 99.

Roger Bohn, Hans-Werner Braun, and Kimberly Claffy.
Mitigating the coming internet crunch: multiple service levels via precedence.
Technical report, University of California, San Diego, November 1993.

R. Braden, D. Clark, and S. Shenker.
Integrated services in the internet architecture: an overview.
Request for Comments (Proposed Standard) 1633, Internet Engineering Task Force, June 1994.

M.H. Bursell, R.J. Hayton, D. Donaldson, and A.J. Herbert.
A mobile object workbench.
In Mobile Agents '98, 1998.

S. Berson, R. Lindell, and R. Braden.
An architecture for advance reservations in the internet.
Technical report, USC Information Sciences Institute, July 1998.

Lee Breslau and Scott Shenker.
Best-effort versus reservations: A simple comparative analysis.
In Proceedings of SIGCOMM '98, Vancouver, 1998.

David D. Clark.
A model for cost allocation and pricing in the internet.
In MIT Workshop on Internet Economics, March 1995.

Jon Crowcroft.
Pricing the internet.
In IEE Colloquium on Charging for ATM (ref. no. 96/222), pages pp1/1-4, November 1996.

Mark Handley.
SAP: Session announcement protocol.
Internet Draft, Internet Engineering Task Force, November 1996.
Work in progress.

Frank P. Kelly.
Charging and Accounting for Bursty Connections, pages 253-278.
MIT Press, 1997.

Andrew Odlyzko.
The economics of the internet: Utility, utilization, pricing, and quality of service.
In Proceedings of SIGCOMM '98, Vancouver, 1998.

About this document ...

A Dynamic Pricing Framework to Support a Scalable, Usage-based Charging Model for Packet-switched Networks

This document was generated using the LaTeX2HTML translator Version 98.2 beta8 (September 9th, 1998)

Copyright © 1993, 1994, 1995, 1996, Nikos Drakos, Computer Based Learning Unit, University of Leeds.
Copyright © 1997, 1998, Ross Moore, Mathematics Department, Macquarie University, Sydney.

The command line arguments were:
latex2html -local_icons -show_section_numbers -split 1 iwan99.tex

The translation was initiated by Mike Rizzo on 1999-02-22

next up previous
Mike Rizzo