Single period profit maximization problem for intermediaries in telecommunication networks under stochastic bandwidth demand

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During the last decade telecommunications has become very competitive environment with many vendors, carriers, and services. Intermediaries are one of the main players in the telecom network market and they may acquire network capacity from market of telecommunication backbone providers who offer different pricing and quality of service schemes and sell purchased capacity to end-users in order to earn some profit. Unfortunately, customers’ bandwidth demands are not known in advance. Therefore, intermediaries may end up having either slack capacity or unsatisfied customer demands. In this paper, to overcome aforementioned problems two-stage stochastic integer programming approach is proposed. Performance of suggested method is tested on several randomly generated scenarios. Moreover, effects of different bandwidth demand distributions are analyzed by using well known measures such as Expected Value of Perfect Information (EVPI) and Value of Stochastic Solution (VSS). Finally, robustness of methodology is evaluated via sensitivity analysis on different problem parameters.