May 7 (Thursday) 10:00-11:00, room C.510 (new building, 5th floor)
Tamás Bukur (Corvinus University of Budapest)
Splitting the bill for bits: Shapley-based cost sharing in European telecommunications
This paper addresses the ongoing debate in the European Union over whether a “Sender Party Network Pays” regulation would solve underinvestment in very high-capacity networks and enhance the competitiveness of the European telecommunications sector. Operators argue that large content providers free ride on infrastructure and should contribute a “fair share” of delivery costs, though policy discussions rarely specify how such shares should be defined. Using a cooperative game-theoretic framework, we apply the Shapley value to formalize this notion of fairness. The model shows that operators and content providers should split traffic-related costs equally, while consumers should bear no direct burden; in competitive settings, operators further divide their share equally among themselves. Because the allocation depends only on observable cost parameters, the framework is straightforward to implement. Incorporating such a rule into market incentives shifts equilibrium closer to the social optimum, leading to higher infrastructure investment and, at high cost levels, improvements in both consumer surplus and overall welfare.