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Market-based address allocation

  • From: Bill Nickless
  • Date: Wed Apr 30 16:06:59 2003


As a thought experiment, think of how the IPv4 addressing situation (bogon advertisements, allocations, explosion of routing table sizes, etc) would be different if the IP community treated IP addresses as a commodity.

The value of an IP address is primarily in its uniqueness. Advertising an address to another network says "send me packets if the destination address matches my advertisement."

But a set of addresses (an aggregate) also has value. The larger the set of addresses, the greater the value. For example, a /15 should end up being more valuable than a pair of /16s, because routing to addresses in the /15 is cheaper than routing to addresses in both of the /16s.

Let's stipulate some economic conditions and see where it leads:

- The price of Internet service should be based on more than
bandwidth: the customer should also pay a surcharge for the
number of prefixes advertised. This would be handled
recursively: Tier 3 providers would have to pay for the
number of prefixes they advertise to Tier 2 providers.
Tier 1 provider peering settlement agreements would
include provisions for the number of prefixes carried.

- Internet address registries should simply do registration.
Just as real estate ownership is registered, so should
IP address space. A recurring fee per registration is
the traditional way to maintain such registries, whether
they be automobiles or parcels of land. Failure to
maintain registration would eventually lead to the
address block being auctioned.

- Internet address blocks should be considered property,
subject to existing property rights and practices.
Owners of address blocks should be able to sell
them or put them up as collateral on a loan. Markets for
address blocks should be established and encouraged.


How might these conditions help solve the problems of address space exhaustion and the size of the default-free zone routing tables?

Some observers have speculated that the IPv4 address space exhaustion crisis has been manufactured to encourage migration to IPv6. This is close to being an "unknowable" or "non-falsifiable" theory, which is to say it's like religious belief or wondering who shot JFK.

But clearly today it's impossible to put a monetary value on migration to IPv6 from IPv4. If my existing IPv4 address space had tangible value, I could make a business decision whether to deploy IPv6 and sell my IPv4 address blocks on the open market. In fact, the sale of IPv4 address blocks could help _finance_ my transition to IPv6.

I believe I've heard Randy Bush suggest publicly (my paraphrase) that organizations that multi-home create costs for everyone running their networks without a default to an upstream. This is because the benefits accrue to the multi-homed organization, but the costs accrue to the default-free network operators. (Randy, feel free to correct me if I've misunderstood your statement!)

A well-understood way to allocate/recover costs is to assign a price to those activities that create those costs. The more directly the price is tied to the costs, the more likely it is that people will behave in such a way that the costs will be covered.

For a while, various ISPs refused to route address blocks smaller than the allocations from the registries. This was a good first approximation, but it had several problems:

Addresses from the "traditional B space" were less valuable than address blocks from the "traditional C space", because the size of the smallest routable aggregate was different in those two spaces. This had the perverse effect of making smaller aggregates (those out of C space) more attractive than larger aggregates (those out of B space).

The size of an organization's address space was directly tied to the ability of the organization to multi-home that address space. The idea seemed to be that larger organizations are more likely to desire multi-homing. There may be an overall correlation to support that idea, but correlation doesn't imply causation.

Portable address space is valuable to organizations for reasons other than multi-homing for reliability. The freedom to move between service providers without the pain of renumbering has significant value. It is reasonable for organizations to have to pay some sort of premium for that freedom, since the cost of that freedom is borne by all default-free network operators. Again, if that premium is high enough, in some cases it can provide a compelling financial business case to go to the trouble of renumbering.

OK Bill, this is great, but how would we get there from here?

Looking at history, there are several ways to attach property rights to things that have formerly been held in common. Whatever process is used, it should be carefully considered to try and avoid unintended consequences. Flag days are probably out; a phased transition plan should be involved.

There is a correlation between the amount of IPv4 address space an organization (institution, government, corporation, etc) has allocated and the amount of time they've been active in the Internet community. How strong is that correlation? Hard to say, but it's there. I see that as partial justification for allowing existing IPv4 address space holders to keep their address space through the transition--even if it means they end up with a "windfall" asset.

Not every society in the world subscribes to the same concept of property rights and free markets as in the West. That probably argues for some allocation of IPv4 address space on a national basis, so that the local society's mechanism of resource allocations can be leveraged.

Some address space should also be allocated in the public interest. But each situation is different and may have different answers. For example: should address space be given for free to primary education institutions? If so, should they be able to sell their allocations and use ISP-supplied aggregatable addresses, with the sale proceeds funding some term of bandwidth service from that ISP? (I would argue in the affirmative, trusting the school boards to do what makes sense in their local situation.)

To conclude:

I doubt this is going to happen anytime soon, if at all. But I think it makes sense to at least discuss the alternatives--if for no other reason than to understand why we're doing things the way we are.

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Bill Nickless http://www.mcs.anl.gov/people/nickless +1 630 252 7390
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