Switching White Papers

Financial Incentives for Route Aggregation and Efficient Address Utilization in the Internet

• Tags:
• switching,
• addresses,
• capacity,
• routers

Overview Growth of the Internet is limited both by the availability of Internet Protocol (IP) addresses and by the capacity of routers. Several interventions can relax these limitations. New routing protocols can expand the pool of available addresses. For example, new technology can improve the capacity of routers. Organizations can give up unused addresses and they can renumber their computers (assign them new addresses) in a way that reduces the burden on routers. None of these interventions, however, is cost-free.

Internet growth results from the actions of many independent decision-makers whose perceptions of individual costs may not reflect the global impact of their actions. The most effective way to induce socially responsible behavior is to introduce financial incentives that make global effects visible to individual decision-makers. Where a trade-off must be made between conflicting goals, financial incentives will permit local decisions that take into account local differences, thus leading to better choices than could be made by any centralized administrative body. This chapter presents a framework for property rights and contracts so that prices for addresses and route advertisements can arise through natural market forces, without the need for a global authority or tax collector.

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