  This paper analyzes two pricing schemes commonly used in WiFi markets: the
flat-rate and the usage-based pricing. The flat-rate pricing encourages the
maximum usage, while the usage-based pricing can flexibly attract more users
especially those with low valuations in mobile Internet access. First, we use
theoretical analysis to compare the two schemes and show that for a single
provider in a market, as long as the WiFi capacity is abundant, the flat-rate
pricing leads to more revenue. Second, we study how a global provider (e.g.,
Skype) collaborates with this monopolist in each local market to provide a
global WiFi service. We formulate {the interactions between the global and
local providers as a dynamic game. In Stage I, the global provider bargains
with the local provider in each market to determine the global WiFi service
price and revenue sharing agreement. In Stage II, local users and travelers
choose local or global WiFi services. We analytically show that the global
provider prefers to use the usage-based pricing to avoid a severe competition
with the local provider. At the equilibrium, the global provider always shares
the majority of his revenue with the local provider to incentivize the
cooperation. Finally, we analytically study how the interaction changes if the
local market has more than one local provider. In this case, the global
provider can integrate the coverages of multiple local providers and provide a
better service. Compared to the local monopoly case, local market competition
enables the global provider to share less revenue with each of the local
providers. However, we numerically show that the global provider's revenue
could decrease, as he shares his revenue with more providers and can only
charge a lower price.

Computer Science and Game Theory;Networking and Internet Architecture