Exploring the Effect of Traffic Differentiation on Interconnection Cost Sharing

This paper addresses the inter-provider costs sharing issue by exploring the effect of the traffic differentiation on the interconnection payments. In particular, we determine an original initiator of a transmission by means of traffic differentiation into two types, referred to as native and stranger. Unlike the existing financial settlement, under which the interconnection payments are made based on the net traffic flow, the proposed model governs cost compensations according to the differentiated traffic flows. Analytical studies were provided using Nash bargaining solution to explore how the determination of a transmission initiator affects intercarrier compensation. For this analysis we considered reciprocal and non-reciprocal access charges.