Wi-Fi or femtocell: User choice and pricing strategy of Wireless Service Provider

Wi-Fi and femtocell are two competing and complementary technologies for delivering broadband wireless Internet access services. For the Wireless Service Provider (WSP) who owns both Wi-Fi and femtocell network, pricing for the coexisted heterogeneous network is a critical yet challenging problem due to different features of the two technologies: Wi-Fi is based on wireless local area network (WLAN), whose time delay is highly dependent on concurrent in-service users; femtocell is based on cellular technology, which provides guaranteed Quality of Service (QoS). In this paper, we consider a monopolist WSP who operates both Wi-Fi and femtocell network within a certain area, and offers corresponding services to a fixed pool of users. Users can freely choose either service that incurs less cost, which is a weighted sum of service price and time delay. Users with different sensitivity for price and time delay tend to choose different services. The major objective of WSP is to maximize its profit, which is the revenue from both services. We first analyze user distribution under different Wi-Fi and femtocell price combination, then study the optimal pricing strategy for WSP. Finally, we use simulation to evaluate the influence of Wi-Fi network quality on the WSP´s utility and user distribution.