Vendor Selection and Task Allocation Strategies in Telecommunication Networks with Different QoS Levels and All You Can Send Pricing Nihat Kasap * , Haldun Aytug ** , S. Selcuk Erenguc ** * Graduate School of Management, Sabanci University Orhanli-Tuzla, 34956, Istanbul, Turkey Email: nihatk@sabanciuniv.edu ** Decision and Information Sciences Department, The Warrington College of Business University of Florida, Gainesville, FL 32611, USA Email: aytugh@ufl.edu ; selcuk.erenguc@cba.ufl.edu Abstract We define two types of tasks a firm performs using data networks. We show that the demands each type of task imposes on the network and a provider’s ability to meet these demands can be quite different. We formulate the associated problem as a cost minimization problem subject to quality and capacity requirements and offer multiple solutions. We also discuss how Bender’s Decomposition can solve a relaxation of this problem. Keywords: Resource allocation, optimization, Bender’s decomposition Introduction Usage of data networks encompasses not only the traditional data applications but also newer applications such as real-time audio/video streaming, voice over TCP/IP, real-time transactions, asynchronous messaging and other batch transactions over digital networks. Major network providers (suppliers) already started efforts to accommodate the traffic generated by these applications. Each application has different capacity and quality of service (QoS) requirements. Each is affected differently by network reliability and speed. Suppliers charge differently for the capacity they sell. For example, Internet service providers (ISPs) offer a combination of fixed price for a fixed maximum bandwidth (all you can send) or pay per hour (or minute) for again a maximum bandwidth. Wireless phone companies charge for text messaging based on bytes sent. Certain calling plans offer different per minute charges for phone conversations depending on when the call is placed. A firm (customer) using data networks has two types of costs. The first one is the cost of bandwidth. The second one is the opportunity cost incurred due to insufficient quality achieved in performing certain tasks. Given this structure it might be in the firm’s interest to use either multiple suppliers or sign multiple contracts with different bandwidth and quality requirements. 390