Deciding How Much to Sell and How to Sell It

Merkato lets you decide how much bandwidth you are releasing for sale and how you want to price it. It also lets you determine the type of market you want to sell it in. Merkato is configured partially by you, on the Merkato interface, and partly by an administrator, using your specifications.

To determine how to make Merkato work for you, answer the following questions:

  1. How will buyer traffic be identified?  Merkato must be able to distinguish between data belonging to each buyer so that bandwidth can be apportioned correctly. The most common identifier is an IP subnet—identified by an IP address and subnet mask. Traffic can also be identified by the physical port or logical interface to which a buyer is connected, VLAN tags on the buyers’ data streams, or the MAC address of the next-hop router from which a buyer’s traffic flows. (All buyers within the same marketplace should use a common method for identification of their traffic to avoid unnecessary complexity.)
  2. In what direction will bandwidth be apportioned? Although buyer traffic nearly always flows both in and out of any interface, it is often unnecessary to apportion bandwidth in both directions. Generally, there is an obvious direction that corresponds to the application being addressed. For example, if you use Merkato to apportion bandwidth among content providers, the direction to control would be from the source of content to the receivers of that content. If there is no obvious direction, Merkato can apportion bandwidth in both directions simultaneously. It is also possible to use Merkato to create separate markets for incoming and outgoing traffic. (If you grant bandwidth in one direction be careful that you allow sufficient bandwidth for protocol acknowledgements in the other direction.)
  3. How strictly do you want to limit bandwidth? The most common method of enforcing bandwidth limits is the least forgiving—discarding any traffic that exceeds the amount of bandwidth purchased. In some cases, however, you may want to allow excess traffic to be sent if there is enough unused capacity. We only recommend allowing this permissive behavior in unique applications.
  4. Do you want to sell spot-market bandwidth, reserved bandwidth, or both? Spot markets allow purchase of bandwidth on-demand, at a price and quantity determined by Merkato’s auction mechanism. You set the maximum capacity and the minimum price floor before auctioning occurs.

    Reservation markets allow buyers to reserve a certain amount of bandwidth for a specific length of time, at a pre-determined price you determine. You set the capacity of bandwidth available for reservations. You can set pricing based on the amount of bandwidth the buyer requests and on the length of time for which the buyer requests it. You also specify a cancellation fee.
  5. How often would you like spot market auctions to run?  By default, spot market auctions run as often as possible¾every five minutes or less. We recommend running auctions as often as possible to provide buyers with the fastest possible response to their changes. If you would like to run auctions less often¾perhaps you would like them to occur at nearly fixed intervals¾your Merkato administrator can increase the pause time between auctions. By default, the pause time is just long enough to allow allocations to be configured in the network before the next auction starts, but this can be increased to lengthen the time between auctions. Although the time between auctions is lengthened, the auctions themselves still occur within the same short interval between pauses.
  6. Do you want buyers to access spot and Reservation markets through a single agent or through separate agents?  Normally, buyers use a single username and password to access both the spot and reservation agents. The buyer selects the agent to download from either the spot garage or the reservation garage. Alternatively, both agents can be kept in the same garage, but must be accessed via different usernames.
  7. How much bandwidth do you want to release to the market?  The price of bandwidth sold in the Merkato system varies according to the level of demand. You can stimulate demand by reducing amount of bandwidth you make available. Of course, you sell less total bandwidth as well. At the other extreme, if available bandwidth always exceeds demand, the market price remains at your floor price (which may be desirable). You can specify the amount of bandwidth to be sold on the Spot market and on the Reservation market separately. In the Spot market, you can adjust the capacity at any time via an Agent interface.
  8. Do you want to create buy-back agents to automatically control the supply of bandwidth?  You can create and configure agents as though you were a buyer. The behavior of these agents has the effect of releasing bandwidth to the marketplace at certain price points.  These artificial buyers bid at certain price points and quantity levels and “win” the bandwidth until they are outbid by true buyers.

Your answers to questions 1-6 determine how your administrator configures Merkato. (See Seller’s Reference Manual, “Seller Type-of-Service Options.”)

The amount of bandwidth you release for sale (question 7) is something you configure with the administrator. Your Merkato Seller agent lets you specify the amount of bandwidth for sale on the spot market. The administrator changes the capacity of the Reservation market.

Creating buy-back agents (question 8) requires you to operate as a buyer in the Merkato market you create.