Prices in a real-world smart market cannot be updated continuously.
The efficient price is determined by comparing a list of user bids to
the available capacity and determining the cutoff price. In fact,
packets arrive not all at once but over time, and thus it would be
necessary to clear the market periodically based on a time-slice of
bids. The efficiency of this scheme, then, depends on how costly it
is to frequently clear the market and on how persistent the periods of
congestion are. If congestion is exceedingly transient then by the
time the market price is updated the state of congestion may have
changed.
A number of network specialists have suggested that many
customers---particularly not-for-profit agencies and schools---will
object because they do not know in advance how much network
utilization will cost them. We believe that this argument is
partially a red herring, since the user's bid always controls the
maximum that network usage costs. Indeed, since we expect that
for most traffic the congestion price will be zero, it should be
possible for most users to avoid ever paying a usage charge by simply
setting all packet bids to zero. When the network is congested enough to have a
positive congestion price, these users will pay the cost in units of
delay rather than cash, as they do today.
We also expect that in a competitive market for network services, fluctuating congestion prices would usually be a ``wholesale'' phenomenon, and that intermediaries would repackage the services and offer them at a guaranteed price to end-users. Essentially this would create a futures market for network services.
There are also auction-theoretic problems that have to be solved. Our proposal specifies a single network entry point with auctioned access. In practice, networks have multiple gateways, each subject to differing states of congestion. Should a smart market be located in a single, central hub, with current prices continuously transmitted to the many gateways? Or should a set of simultaneous auctions operate at each gateway? How much coordination should there be between the separate auctions? All of these questions need not only theoretical models, but also empirical work to determine the optimal rate of market-clearing and inter-auction information sharing, given the costs and delays of real-time communication.
Another serious problem for almost any usage pricing scheme is how to
correctly determine whether sender or receiver should be billed. With
telephone calls it is clear that in most cases the originator of a
call should pay. However, in a packet network, both ``sides''
originate their own packets, and in a connectionless network there is
no mechanism for identifying party B's packets that were solicited as
responses to a session initiated by party A. Consider a simple
example: A major use of the Internet is for file retrieval from public
archives. If the originator of each packet were charged for that
packet's congestion cost, then the providers of free public goods (the
file archives) would pay nearly all of the congestion charges induced
by a user's file request. Either the public archive
provider would need a billing mechanism to charge requesters for the
(ex post) congestion charges, or the network would need to be
engineered so that it could bill the correct party. In principle this
problem can be solved by schemes like ``800'', ``900'' and collect
phone calls, but the added complexity in a packetized network may make
these schemes too costly.