Monday, April 28, 2014

How should consumers benefit if Netflix adopts P2P technology?

Over the weekend there was considerable chatter on the Internet about Netflix and Peer-to-Peer (P2P) architectures. According to news reports like this, Netflix is exploring P2P technology as a delivery mechanism, to defray cost of delivery to consumers. This becomes even relevant with the new net neutrality proposals that will allow "fast lanes" to exist on the Internet, paving the way for ISPs to charge more from customers like Netflix which will then ultimately get passed on to Netflix's consumers.

However, if Netflix does intend to use P2P to work around this incoming increase in costs, why should consumers help out Netflix? We tackled this precise issue a few years ago and provided some answers. We looked at scenarios of a coalition that has one large "atomic" player (e.g. Netflix) and infinitesimally small peers (relative to the atomic player). The idea is applicable for many different scenarios, for example Femtocells, the FON network, P2P peer-assisted streaming the kind Netflix is exploring etc. We asked the question: how should the coalition profits (or cost savings) be fairly distributed amongst its constituents? We applied coalition game theory and developed new results for fluid Shapley values and the following paper was published:

Vishal Misra, Stratis Ioannidis, Augustin Chaintreau and Laurent Massoulie, Incentivizing Peer-Assisted Services: A Fluid Shapley Value ApproachProceedings of ACM/Sigmetrics, New York, June, 2010. 

The presentation associated with the paper can be obtained here.

The paper has all the details but the result applicable to the scenario of peer-assisted streaming would be that consumers should get back roughly half of the dollars they save Netflix in terms of bandwidth costs. Say a customer of Netflix uploads 10GB a month on behalf of Netflix to other customers. If Netflix had instead paid a dollar to it's CDN for this 10GB (or the ISP for the "fast lane access"), then assuming a linear cost model this customer should be getting 50 cents back from Netflix for the help that it provides. The paper has  complete analysis that includes general (non-linear) cost models if it interests you but the message is that if providers switch to peer-assistance, then the peers need to be compensated appropriately. Potentially this is a win-win solution for all (perhaps not for the "fast-lane charging" ISPs!).