Association for Public Policy Analysis & Management

In the IT industry, IP addresses are commonly thought of and treated as virtual real estate.  This paper explores how IP addresses are treated as common pool resource (CPR) goods in a number of key ways and the  implications of that within the industry.

IP addresses are a resource used in common by a few actors, they are scarce or limited in some way, and improper use or distribution of the good leads to "catastrophic" consequences.  IPv4 addresses were initially designed to be low exclusivity/low rivalry goods, but as demand for them increased, they came to resemble toll/club goods.  The resource management solution was to create a much larger pool of available addresses. 

There were numerous problems with IPv4 as it moved towards toll good status, but was still treated as a CPR good.   While nothing could have prevented the explosion in demand for IP addresses when the Internet became available for commercial use,  this increase of exclusivity stressed the capacity of routers and led to hoarding behavior among owners. These problems were partly addressed by designating 192.168/16 for internal use (NAT) in RFC 1918.  This method of addressing the scarcity violated core end to end architectural philosophy, so IPv6 was created. While this lowered its exclusivity considerably, it has been extremely expensive and time consuming to implement.  

However, as IPv6 addresses become scarce at some distant point in the future, they will again come to act as toll/club goods.  This could be delayed, possibly indefinitely, by incentivizing efficient allocations. Strategies used to manage natural CPR goods can be applied to man-made-CPR goods like IP addresses.    These mechanisms can be tested by implementing test protocols on particular allocation blocks,  through agent based models predicting game theoretic behavior of IP address owners, and /or through studying owner behavior from historical routing table data.