rfc1744.txt

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RFC 1744          Management of Internet Address Space     December 1994


   from time to time to accommodate longer term address usage trends).
   It is also reasonable to predict a strengthening market for dynamic
   address translation technologies, as an alternate client strategy to
   the purchase of large address blocks from the trading market (this
   scenario is the use of a private, potentially non-unique address
   space within the client network, and the dynamic translation of end
   host addresses into a smaller unique Internet routed address pool to
   support external end-to-end sessions), and also the strengthened
   market for firewall boundary technologies which also admit the use of
   private address space within the client domain.

   While it is not possible to accurately predict specific outcomes, it
   would appear to be the case that increasing overall efficiency of
   address utilisation will be most visible only after unallocated
   address pool exhaustion has occurred, as there is then a consequent
   strong economic motivation for such activity across all the entire
   Internet address space.

   As perhaps a cautionary comment regarding evolutionary technologies
   for IPv4, it would also appear to be the case that evolutionary
   technologies will not assume a quantum increase in economic viability
   simply because of unallocated address pool exhaustion.  Such
   technologies will only lever additional advantage over IPv4 once the
   marginal cost of increased IPv4 address space deployment efficiency
   exceeds the marginal cost of deployment of new technologies, a
   situation which may not occur for some considerable time after
   unallocated address pool exhaustion.

3. Modification of Current Internet Address Management Policies

   The three major attributes of the current address allocation
   procedures from the unallocated pool are "first come first served"
   (FCFS) and allocation on a "once and for all" (OAFA) basis, and the
   absence of any charge for address allocation (FREE).

   As noted above, the outcomes of such a process, when constrained by
   the finite quantity of the resource in question, ultimately leads to
   a secondary market in the resource, where initially allocated
   resources are subsequently traded at their market valuation.  This
   secondary trade benefits only those entities who established a
   primary position from the unallocated pool, and it is noted with
   concern that the optimal behaviour while the unallocated pool exists
   is to hoard allocated addresses on the basis that the secondary
   market will come into existence once the pool is exhausted.  Such a
   market does not benefit the original address management operation,
   nor does it necessarily benefit the wider community of current and
   potential interested parties in the Internet community.




Huston                                                          [Page 5]

RFC 1744          Management of Internet Address Space     December 1994


   It is also noted that the outcome of a free address allocation policy
   is the vesting of the management of the address space to the larger
   Internet Service Providers, on the basis that in the absence of end
   client address allocation charging policies which have the capability
   of ensuring an independent address management function, those
   entities who have the greatest vested interest in the quality of the
   address allocation and registration function will inevitably fund
   such an operation in the absence of any other mechanism.  The risk
   within this scenario is that placing the major asset of any
   communications medium into the sphere of interest of the current
   entities trading within that medium acts to increase the risk of
   anti-competitive monopolistic trading practices.

   An alternate address management strategy is one of allocation and
   recovery, where the allocation of an address is restricted to a
   defined period, so that the allocation can be regarded as a lease of
   the resource.  In such an environment pricing of the resource is a
   potential tool to achieve an efficient and dynamic address allocation
   mechanism (although it is immediately asserted that pricing alone may
   be insufficient to ensure a fair, equitable and rational outcome of
   address accessibility and subsequent exploitation, and consequently
   pricing and associated allocation policies would be a normative
   approach to such a public resource management issue).

   It is noted that pricing as a component of a public resource
   management framework is a very common practice, where price and
   policy are used together to ensure equitable access, efficient
   utilisation and availability for reallocation after use.  Pricing
   practices which include features of higher cost for larger address
   blocks assist with equitable access to a diversity of entities who
   desire address allocation (in effect a scarcity premium), and pricing
   practices can be devised to encourage provider-based dynamic address
   allocation and reallocation environments.

   In the same fashion as a conventional lease, the leasee would have
   the first option for renewal of the lease at the termination of the
   lease period, allowing the lease to be developed and maintain a
   market value.  Such pricing policies would effectively imply a
   differential cost for deployment of a uniquely addressed host with
   potential full Internet peering and reachability (including local
   reachability) and deployment of a host with a locally defined (and
   potentially non-unique) address and consequent restriction to local
   reachability.

   It is also observed that pricing policies can encourage efficient
   address space utilisation through factors of opportunity cost of
   unused space, balanced by the potential cost of host renumbering
   practices or the cost of deployment of dynamic address allocation or



Huston                                                          [Page 6]

RFC 1744          Management of Internet Address Space     December 1994


   translation technologies.

   There are a number of anticipated outcomes of a management mechanism
   which including pricing elements for the IPv4 address space

   Firstly current address space utilisation projections (anticipated
   useful lifetime for the pool of unallocated addresses) would extend
   further into the future due to the factors of cost pressure for more
   efficient address utilisation, and the additional cost of issuing a
   local resource with a globally unique address and the opportunity
   cost of extravagant use of global addresses with purely local
   domains.

   Secondly dynamic host address binding technologies, and dynamic
   network address translation technologies would be anticipated to be
   widely deployed, based on the perceived cost opportunities of using
   such technologies as an alternative to extensive static host address
   binding using globally unique addresses.  Use of such technologies
   would imply further extension of the lifetime of the address pool.

   Such pricing practices could be applied on a basis of all future
   address allocations, leaving those entities with already allocated
   address blocks outside of the lease mechanism.  Alternatively such
   previous allocations could be converted to leases, applying a single
   management policy across the entire address space and accordingly
   levering the maximal benefit from such pricing policies in terms of
   maximising the lifetime of the address space and maximising the value
   of the address space.  In such a situation of conversion some level
   of recognition of previous implicit OAFA allocation policies can be
   offset through delay of conversion to lease and also through
   conversion of such previously allocated addresses to the lease,
   waiving the lease purchase costs in such cases.

4. Internet Environment Considerations

   Pricing for IPv4 addresses as a component of the overall address
   management framework is by no means a novel concept, and despite the
   advantages such pricing policies may offer in terms of outcomes of
   efficiency of utilisation, fair and equitable access, security of
   allocation and consequent market value, and despite the address pool
   exhaustion time offsets such policies offer, it is the undeniable
   case that no explicit pricing policies have been successfully
   introduced into the Internet address allocation processes to date.

   There are two predominate reasons offered in this analysis.  The
   first is the somewhat uncertain nature of the exact origin of primary
   ownership of the IPv4 address space, and the unallocated address pool
   in particular.  The address pool has been administered according to



Huston                                                          [Page 7]

RFC 1744          Management of Internet Address Space     December 1994


   policies drafted by the Internet Assigned Numbers Authority (IANA).
   The policies drafted by IANA are effectively policies which are the
   outcome of the same consensus seeking approach used within the
   Internet Standards process, and it is noted that within such an
   environment unilateral declarations of ownership and related
   assertions of policy control have difficulty in asserting an
   effective role within the Internet community and such declarations
   are generally incapable of gathering consensus support (It can be
   argued that "ownership" is not a relevant concept within this domain,
   as the essential attribute of such address elements are their
   uniqueness within the global domain, and such an attribute is only
   feasible through common recognition of a coordinated and reliable
   management environment rather than the historical origin of the
   resource in question).  Secondly there is no formal recognition of
   the address space as being a shared international resource which sits
   within the purview of national public resource management policies
   and administrative entities of each nation, nor is there a
   recognition of the address space as a private resource owned and
   administered by a single entity.

   Recent policy changes, whereby large segments of the unallocated
   address pool have been assigned to international bodies on a regional
   basis, with further assignment to bodies within national contexts,
   have been undertaken with a constant address allocation policy of
   FCFS, OAFA and FREE, and although some effort has been made to
   increase the deployment efficiency through explicit allocation policy
   enumeration, the general characteristics of address allocation are
   unchanged to date (those characteristics being of course FCFS, OAFA
   and FREE).

   One potential scenario is to speculate that pricing processes imposed
   by the address allocation agency are not feasible within the current
   Internet environment to the extent that any such policies could
   significantly motivate increased address deployment efficiency to the
   levels required for longer term unallocated address pool lifetime
   extension.  The lack of capability to employ pricing as a managerial
   mechanism, even to the extent of cost recovery of the allocation and
   subsequent registry maintenance function has a number of possible
   longer term outcomes:

    a) such functions will be restructured and operated from duly
       authorised national administrative bodies for each nation.
       Here the observation that the address pool delegation sequence
       within the current Internet environment has not to date been
       aligned with recognised national public communications resource
       administrative entities is an expression of the major problem
       that the unallocated address pool is not recognised as being
       intrinsically the same public resource entity as the radio



Huston                                                          [Page 8]

RFC 1744          Management of Internet Address Space     December 1994