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Contribution Feb 2013 Text Display Screen



Name : HILL, Richard
Date : July 29, 2013
Organization : APIG
Country : Switzerland
Issues : Issue 2

Contribution :   

International Public Policy Issues Concerning IPv4 Addresses:
Should Governments Intervene to Correct a Standardization Failure?

Richard Hill*, July 2013
The word version of this paper is available at:
 http://www.apig.ch/news.htm
1. What are the issues?
As stated in the WTPF Backgrounder on IPv4 and IPv6 issues[i]:
Because IPv6 was designed without backward compatibility, the transition from IPv4 to IPv6 essentially needs a ‘dual stack’ phase during which hosts operate with both protocol stacks concurrently, using the IPv6 protocol stack to speak to other IPv6 hosts and the IPv4 protocol stack to speak to other IPv4 hosts.  The availability (or lack thereof) of IPv4 addresses is therefore a factor which continues to be of importance during the transition period.
For the moment, it is unsure how long the IPv4/IPv6 transition period will last. Some worry that it might last indefinitely.
Indeed, although IPv4 addresses are theoretically exhausted, there are technical and economical means to allow their continued usage, in particular Network Address Translation (NAT) and secondary markets (entities that have more addresses than they need transfer them to entities that need more addresses).  The cost of IPv6 deployment is significant and alternative investments may be more profitable, thus the rate of implementation of IPv6 has been much slower than expected.[ii]
2. Should governments do something?
2.1 Calls for government intervention
As a consequence, some have called for government actions to facilitate the transition to IPv6.  Such proposed actions include awareness, training, and capacity building, but also procurement rules and financial incentives.[iii]
Indeed, a well-known expert on IP addressing has suggested that the slow rate of transition to IPv6 may be an example of market failure, and thus government intervention may be justified, including possibly regulatory action to require adoption of IPv6.[iv]  This expert refers to the following definition of “market failure”:
A market failure exists when the production or use of goods and services by the market is not efficient.  That is, there exists another outcome where market participants' total gains from the new outcome outweigh their losses (even if some participants lose under the new arrangement). 
As noted above, the cost of IPv6 deployment is significant and alternative investments may be more profitable, thus it is not at all obvious that the market is not operating efficiently for what regards the transition to IPv6.  Indeed, market failures usually arise in the presence of monopolies, externalities, or in the case where the product is a public good.  But such would not appear to be the case for IP addresses:
a)                  Although IP addresses are allocated by specific private-sector entities, the Regional Internet Registries, it cannot be said that these entities act as a monopoly in the economic sense of the term.  On the contrary, these entities allocate addresses on a non-discriminatory basis to anybody who requests them.
b)                  Because of the cost of transitioning to IPv6, it is not clear that there is, at present, a net positive externality that would be realized if everybody transitions to IPv6.  Presumably there would be such an externality if it were impossible to obtain IPv4 addresses, so that new entrants would be excluded from connecting to the Internet, but this is not the case at present: there are ways to obtain IPv4 addresses.[v]
c)                  IP addresses are not public goods in the usual sense[vi] of that term, because they are both excludable and rivalrous.
However, even if the slow rate of transition to IPv6 is not an example of market failure, it may well be an example of a different kind of failure, which can be called “standardization failure”.
The IPv6 protocol was finalized in 1998, but its development was a rather complex process involving competing proposals and much discussion.[vii]  In retrospect, it seems clear that the decision not to ensure backwards compatibility has resulted in the observed slow rate of transition to IPv6.
Thus, it is legitimate to ask whether governments should intervene to correct the situation and, if so, how.  One should also ask whether government interventions are likely to be successful, particularly in light of the notorious failure of governments to promote an older failed standard, the OSI suite of protocols which was discarded[viii] in favor of TCP/IP and the related Internet protocols.
2.2 Analysis of basis (or not) for government intervention
At present, there is nothing to suggest that developed countries are suffering from the slow rate of transition to IPv6, because the techniques mentioned above (NAT and transfer of IPv4 addresses) appear to be sufficient to meet market needs for IPv4 addresses.[ix]
Similarly, there is nothing to suggest that new entrants in developed countries are not able to obtain sufficient IPv4 addresses.[x]  However, it is not disputed that there is a historical imbalance in the allocation of IPv4 addresses, with developed countries having relatively more addresses than developing countries.[xi]
It has been argued that this situation creates an economic advantage for developed countries, in particular because it affects the topology of Internet routing[xii].  While this seems intuitively plausible, there are apparently no empirical studies to confirm it.  However, it is clear that the current needs-based method of IP address allocation is not efficient from the point of view of the theory of economics: a transfer market would be more efficient (but might have other disadvantages)[xiii].
It has been argued that, given the current IP address allocation policies, the historical imbalance between early adopters of Internet (developed countries) and late adopters (developing countries) will disappear.  That was not the case in 2010[xiv].  Nor is it the case today.
The chart below was prepared from the data for 16 June 2013[xv].  It plots the logarithm of the number of allocated IPv6 addresses per country versus the logarithm of allocated IPv4 addresses per country.  As can be seen, there is a high degree of correlation.  That is, the actual data shows that the current holders of IPv4 addresses are the ones who are getting IPv6 addresses (which is logical in a needs-based allocation regime: ISPs that already have many customers will get more addresses[xvi]).  Indeed, there is significant concentration of IP addresses and the entities that already have large blocks are those that obtain new large allocations.[xvii]  So historical imbalances are not being corrected.
The chart is available in the word version at http://www.apig.ch/news.htm
It shows a linear relationship between
 the logarithm of allocated IPv4 addresses and the logarithm of IPv6 addresses.
If it is felt that the historical geographical imbalance is undesirable, then steps should be taken to address it.  Such steps could include the reclamation of IP address blocks in developed countries that are apparently underutilized (in particular, some holders of the original “class A” allocations may not need such large blocks[xviii]) and their transfer to developing countries.
But this is only possible if IP addresses are not considered to be the private property of the assignee of the address block, and it is not clear that that is the case (that is, it may well be that the assignee of an IP address block owns it in a legal sense)[xix].
Indeed, since the position taken by the US and other developed countries has been that IP addresses should not be allocated or otherwise regulated by governments, it is difficult to see why, from the legal point of view, they would be considered to be anything other than privately owned assets.
Of course it has been proposed that some countries, in particular developing countries, could benefit from a different regime, namely one in which IP addresses are allocated by national governments, or at least under the control of national governments.[xx]  However, such proposals were opposed.  We note in passing that it is not correct to assume (as has been suggested[xxi]) that the ITU could not possibly meet the criteria[xxii] to become an IP address allocation authority: in principle, if the ITU membership were to agree, the ITU could meet those criteria.
In this context, it should be noted that ITU-T Study Group 2 has invited the Director of TSB to commission a study to monitor and evaluate the allocation of IPv4 addresses which may be still available, returned or unused, in the interest of developing countries, and to provide guidance to the TSB Director.[xxiii]
Independently of the historical imbalances, there might be other reasons to envisage government intervention.  As a well respected technologist put the matter[xxiv]:
We are witnessing an industry that is no longer using technical innovation, openness and diversification as its primary means of propulsion. The widespread use of NATs limit the technical substrate of the Internet to a very restricted model of simple client/server interactions using TCP and UDP. The use of NATs force the interactions into client-initiated transactions, and the model of an open network with considerable flexibility in the way in which communications took place is no longer being sustained. Today's internet is serviced by a far smaller number of very large players, each of whom appear to be assuming a very strong position within their respective markets. The drivers for such larger players tend towards risk aversion, conservatism and increased levels of control across their scope of operation. The same trends of market aggregation are now appearing in content provision, where a small number of content providers are exerting a dominant position across the entire Internet.
If in fact a small number of content providers are exerting a dominant position, then the competent competition authorities should consider taking action.  However, it is not clear how such action would have short-term effects with respect to the transition to IPv6.
3. Conclusion
In conclusion, if it is felt that the relatively slow rate of transition to IPv6 simply reflects market and economic realities, then there is no need for government intervention apart from the current awareness and capacity building efforts, for example as called for in invites Member States and Sector Members 1 of WTSA-12 Resolution 64 (Johannesburg, 2008; Dubai, 2012).
On the other hand, if it is felt that the relatively slow transition to IPv6 perpetuates the historical geographical imbalances in IP address allocation, then some consideration could be given to taking steps to expropriate under-utilized IPv4 blocks and moving towards geographical allocation of recovered space, even perhaps to national allocation of the recovered space.
Independently of that, it has been suggested that the increasing concentration of IP address allocations may indicate some abuse of dominant market positions, so competition authorities may wish to consider this matter.


* President, Association for Proper Internet Governance (APIG)
[i] Available at < http://www.itu.int/en/wtpf-13/Pages/backgrounders.aspx >
[ii] See WTPF-13/INF/12 from APNIC at < http://www.itu.int/md/S13-WTPF13-INF-0012/en >
[iii] See WTPF-13/INF/12
[iv] Geoff Huston, “Is the Transition to IPv6 a "Market Failure?”, The ISP Column (September 2009)
 <http://www.potaroo.net/ispcol/2009-09/v6trans.html>
[v] See WTPF-13/INF/12
[vi] See <http://en.wikipedia.org/wiki/Public_good> accessed 16 June 2013
[vii] Laura DeNardis, Protocol Politics: The Globalization of Internet Governance (2009) MIT Press
[viii] See <http://en.wikipedia.org/wiki/Open_Systems_Interconnection> accessed 16 June 2013
[ix] Milton Muller, “Dimensioning the Elephant: An Empirical Analysis of the IPv4 Market”, Internet Governance Project (1 September 2012)
 <http://www.internetgovernance.org/wordpress/wp-content/uploads/IPv4marketTPRC20122.pdf>
[x] See WTPF-13/INF/12
[xi] See WTSA-12 Resolution 64 (Johannesburg, 2008; Dubai, 2012)
[xii] See 18 ff. of document IPV6GROUP C – 19 <http://www.itu.int/md/T09-IPV6-C-0019/en>
[xiii] See Milton Muller, “Economic factors in the allocation of IP addresses”, ITU (17 September 2009)
 <http://www.itu.int/dms_pub/itu-t/oth/3B/02/T3B020000020003PDFE.pdf>
[xiv] See 19 of document IPV6GROUP C – 19 <http://www.itu.int/md/T09-IPV6-C-0019/en>
[xv] <http://resources.potaroo.net/iso3166/> accessed 16 June 2013
[xvi] For more considerations on this, see 11 ff. of of document IPV6GROUP C – 19
<http://www.itu.int/md/T09-IPV6-C-0019/en>
[xvii] Geoff Huston, “Addressing 2012 – Another One Bites the Dust”, The ISP Column (January 2013),
<http://www.potaroo.net/ispcol/2013-01/2012.html> accessed 22 June 2013.  According to Figure 4, t
he shift from 2010 to 2011 showed an increase in the proportion of address space being allocated to the larger providers. The largest 10% of allocations in 2010 received, 89.8% of the total allocated address space, while this rose slightly to 91.6% in 2011. The impact of address exhaustion in APNIC was evident in 2012, as the largest 10% of allocations received 89.8% of all addresses, the same level as 2010.
[xviii] See 33 of document IPV6GROUP C – 19 <http://www.itu.int/md/T09-IPV6-C-0019/en>
[xix] See Ernesto M. Rubi, “The IPv4 Number Crisis: The Question of Property Rights in Legacy and non-Legacy IPv4 Numbers”, American Intellectual Property Law Association Quarterly Journal (39-4, January 2012)
<http://www.aipla.org/learningcenter/library/books/qj/Pages/Quarterly-Journal-39-4.aspx>; a summary is given in Milton Mueller “Ownership Rights in IP Addresses? A Legal Analysis”, Internet Governance Project (29 November 2010)
< http://www.internetgovernance.org/2010/11/29/ownership-rights-in-ip-addresses-a-legal-analysis/>
[xx] See 42 document IPV6GROUP C – 19 <http://www.itu.int/md/T09-IPV6-C-0019/en>; document IPV6GROUP TD 3 <http://www.itu.int/md/T09-IPV6-100315-TD-PLEN-0003/en>; and considering f) of WTSA-12 Resolution 64 (Johannesburg, 2008; Dubai, 2012).
[xxi] <http://www.itu.int/en/council/Pages/display1.aspx?ListItemID=38> accessed 16 June 2013
[xxii] <http://www.icann.org/en/resources/policy/global-addressing/new-rirs-criteria> accessed 16 June 2013
[xxiii] TD 58 Rev.2 (PLEN/2), “Ad hoc meeting on SG2 mandates for the implementation of WTSA Resolution 64 - Proposed work items”
[xxiv] [xxiv] Geoff Huston, “Addressing 2012 – Another One Bites the Dust”, The ISP Column (January 2013),
<http://www.potaroo.net/ispcol/2013-01/2012.html> accessed 22 June 2013