Market-based address allocation

Wed Apr 30 14:44:49 UTC 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.

===
Bill Nickless    http://www.mcs.anl.gov/people/nickless      +1 630 252 7390
PGP:0E 0F 16 80 C5 B1 69 52 E1 44 1A A5 0E 1B 74 F7     nickless at mcs.anl.gov