A New Pricing Model for Competitive Telecommunications Services Using Congestion Discounts

In this paper, we present a new model for using prices as a way to shift traffic from congested peak periods to non-peak periods in telecommunications networks, and hence balance the load and also ensure that almost no one is turned away (or “blocked”) from being provided service. We use the offer of congestion discounts to customers who have the choice of accepting these rebates and returning during a subsequent non-peak period, or who can reject the offer and obtain services right away. We model the problem as a mathematical program in which the network provider tries to reduce cost by minimizing total discounts offered but at the same time ensuring that almost all (i.e. 99%) of those requesting services are served. We apply this model to various scenarios and show that, except during the situations of extreme persistence of high traffic volume, the scheme would lead to zero blocking and an increase in revenue over the nondiscounting case.