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IPv4 Address Exhaustion and a Trading Market

Jay Daley

There are discussions starting within the Regional Internet Registries (RIRs) about the creation of trading market in IPv4 addresses as we approach the inevitable exhaustion of unallocated addresses. The view being put forward is basically "this is likely to happen anyway and by discussing it now, we can ensure it happens in an orderly way".

When I first heard this idea I was a bit surprised. The RIRs are policy based bodies and so a shift to a trading market appears to be an abandonment of that policy base. However I have been partly corrected on that. The discussions within RIPE (I've no idea about the other RIRs policy process) are for a policy based allocation policy to stay in place, but the outcome of that is to be a 'right to buy' rather than an allocation as now.

Of course this hybrid trading market still only enables policy control of the buying of domains, not the selling of domains, which is where some of the real disagreements start to surface.

The International View

The view taken by some countries is that the global allocation of IPv4 address space is unbalanced in favour of the early adopters, namely US-based organisations. The introduction of the RIRs has meant 'fair' allocation since then but the historical imbalance goes uncorrected. So if a trading mechanism were established now, the countries that were not early adopters are going to have to pay possibly very large sums for things that others got for free.

The view from some of the RIR people is that the crunch is coming soon anyway and there is no point trying to correct that balance, it will take too much effort to do and not buy us much time anyway. They also believe that the trading mechanism will lead to many of those early adopters selling on large parts of their allocations thereby introducing more addresses than would be available otherwise. I'll come back to both of those points later.

What About IPv6

Of course the looming exhaustion [PDF] of IPv4 addresses is nothing new. IPv6 was designed to get around the limitations of IPv4 and IPv6 addresses are available easily and in vast numbers, so why can't we just use that?

The simple answer is that IPv6 devices cannot talk to IPv4 devices and only a small fraction of the Internet runs IPv6. So if I have only IPv6 on my desktop, I will not be able to contact web sites such as the BBC News, Google, The Register or even our web site.

Therefore, for the foreseeable future, both IPv4 and IPv6 addresses are going to be needed. If you have a closed network, such as an internal management system, then you can use IPv6 alone, but not otherwise.

Certified Allocations

There has been talk of moving to a secure routing system for some years now where address allocations are issued certificates and those are then used by Internet routers to determine if someone is entitled to route the addresses they are advertising.

The RIRs have started the process of issuing certificates for allocated addresses, but the technology has not been finalised or deployed to see these being used automatically. In the interim some RIRs hope they will be used manually (i.e. before we interconnect you show me yours and I'll show you mine).

Now we have the really interesting position. How do those with pre-RIR allocations get certificates? Should they have to go through an allocation policy process before they can get a certificate?

Alternatively, what if the price of the certificate reflects the size of the addresses? Say a /19 cost roughly €50,000. That makes roughly €100,000,000 for a /8. In a trading market this may well be the figure a /8 fetches when sold to the highest bidder.

Timescales and Investment

Exhaustion of unallocated IPv4 addresses is unavoidable and we have to migrate to IPv6. Everyone knows that even we don't all act accordingly as uptake and use of IPv6 address space is very low.

This seems to come down to basic economics. Without a business case for the move to IPv6 only a few are going to make the move. So the question is whether a trading market aids that move, which to me appears not to be the case:

  • Those who already have IPv4 addresses will not have any pressure to move. Don't forget, these are the ones running the established services that need to move to IPv6 to be accessible to others.
  • Those who need IPv4 addresses may be able to use IPv6 for closed networks, but otherwise are going to have to spend money on IPv4 addresses that might otherwise be used for IPv6 migration.

Equipment is generally replaced in cycles, often three to five years, at which point new functionality tends to be introduced by being included in the newer products. If I ran a large network of cable modems I would have started a couple of years ago to look to the next versions to support IPv6, but I would never consider swapping out perfectly good ones just for that functionality. It might take several years before they all had IPv6 and I could switch to that for the management network, reducing address allocation.

So going back to the point on the need to reclaim space, maybe there is a valid reason, which is to buy enough time for the ordinary update cycle to enable the functionality without forcing people to make out of the ordinary investment.

There's More

There is a lot of stuff I haven't covered here, such as the role of Network Address Translation (NAT), the worry that carperbaggers might try to grab the remaining space in anticipation of a market, the role of RIRs in controlling routeing (correct spelling, trust me) or not and how to get people to really plan for IPv6.

What is clear though is that there is a lot to think about in this one development and it has a heavy impact on a lot of people. This is one to watch.

By Jay Daley, Chief Executive of the .nz registry
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