Market Modelling in Access Networks: an approach combining dynamic systems and Game Theory

Abstract:
This paper presents an approach to the techno-economic evaluation of access networks where market behaviour and competition effects are modelled resorting to system dynamics and game theory reasoning. This approach differs from what is conventionally done in the following aspects: (i) The presence of an operator in a market, which is usually modelled by some kind of logistic curve with initial and final penetration rates, now takes into consideration the presence of other operators in a dynamic fashion, influenced by a quality function where parameters such as bandwidth, offered services, tariffs and contention ratios are involved; (ii) competing operators are evaluated not only in terms of market shares but also in terms of economic results. In order to validate the presented ideas, the approach is applied to a situation representative of an urban area where two operators compete with FTTx technologies. The results illustrate the potential of the combined system dynamics and game theory approach. In addition to its value as a methodology to study real world situations, the present approach has also been used as a valuable pedagogic tool simulating a business environment in telecommunications engineering capstone project classes; allowing activities such as the following: (i) Market gaming around a set of business cases where students are organized in teams playing different engineering professional roles (role playing); (ii) Linking the outcome of market gaming and associated business cases with syllabus topics and with practical issues, resorting to engineering decisions that have to prepared based on technology choices, network design, market simulation and economic-financial analysis. This pedagogic value has already been recognized by the award of a prestigious international prize: "HP Innovations on Education Grant".