Customized Data Plans for Mobile Users: Feasibility and Benefits of Data Trading

The growing volume of mobile data traffic has led many Internet service providers (ISPs) to cap the monthly data usage of their users and to charge overage fees, when the data caps are exceeded. Yet data caps imperfectly capture the reality of heterogeneous data usage over a month—even the same user may have varied requirements from month to month. In response, some ISPs are providing alternative avenues for users to customize data plans to their needs. In this paper, we examine a secondary data market, as for example created by China Mobile Hong Kong, in which users can buy and sell leftover data caps from one another. While similar to an auction in that users submit bids to buy and sell data, it differs from traditional double auctions in that the ISP serves as the middleman between buyers and sellers. Such a market faces two questions. First, can users learn each others’ trading behavior well enough for the market to function, and second, do ISPs have a financial incentive to offer such a market? Different users’ abilities to trade data depend on others, thus forcing users to not only optimize the amounts of data they bid, but also to learn and adjust for other users’ trading behavior. We derive users’ optimal behavior and propose an algorithm for ISPs to match buyers and sellers. We compare the optimal matchings for different ISP objectives and derive conditions under which the secondary market increases ISP revenue: while the ISP loses revenue from overage fees, it can assess administration fees and profit from the differences between the buyer and seller prices. Finally, we use one year of usage data from 100 U.S. mobile users to simulate the market dynamics and to illustrate that sustainable conditions for a revenue increase for the ISP can hold in practice.