Could the Internet run out of space?

Running out of space? Web cafe users in China
When a small group of university scientists began linking computers on different campus sites at the very end of the 1960s, they had no idea that their work would one day spiral into a globally-accessible network in which the total number of pages is measured in the tens of billions.

Such has been the Internet’s phenomenal and dizzying growth that much of the technology which supports it has grown organically and without much forward planning. But what if the Internet was to run out of space This isn’t just a theoretical debate, but something experts warn could become a real issue within a few years. Now, one business school professor studying the issue believes he may have come up with a solution. The problem isn’t one of storage, but of location, the so-called IP addresses which are handed out to new sites. These are all given a unique number based on something called the IPv4 (Internet protocol version 4) standard, the system under which the web first expanded globally. IPv4 assigns main host addresses using a system which gives around 4 billion possible combinations, a figure which at the time seemed greater than could possibly ever be used. But now the numbers are running out. A new system, IPv6, has been developed, but technical issues and a reluctance among Web companies to begin using it means it could be years before this is widely adopted. Benjamin G. Edelman, a professor of business administration at Harvard Business School, is warning that such a bottleneck could seriously hamper the Internet, saying the Web is in danger of becoming “a victim of its own success.”

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If new technology businesses can’t acquire sufficient IP addresses it will be difficult for them to get a foothold in the industry, he said. “Entry and potential entry are an important part of competition. We need to make sure new firms can easily begin operations so that existing providers can’t hold customers hostage.” Edelman believes he has come up with an interim solution — a free market in defunct or unused IP addresses, of which there are many millions, which can be transferred, at a price, to new owners. “It’s unlikely that other networks would return their space for free. Why would they” he said. “But if the price is right, they may be willing to transfer the space to someone who needs it more.” In the Web’s early days, Edelman explains, when the number of IP addresses seemed inexhaustible, some networks were allocated huge numbers by the non-governmental independent regulators which control this. Some of these companies later scaled back their Internet activities or even went out of business altogether.

Fact Box FT MBA Rankings 1= London Business School, U.K. 1= Wharton, U.S.3. Harvard, U.S.4. Columbia, U.S.5. Insead, France/Singapore6. Stanford GSB, U.S.6= IE Business School, Spain8. Ceibs, China9. MIT Sloan, U.S.10. NYU, Stern, U.S.Source: Financial Times 2009

These unused addresses could attract a market price, bringing not only what economists call “allocative efficiency” — moving resources to where they are most needed — but also another benefit. “By putting a positive price on IPv4 space, a market mechanism would remind current v4 users that their v4 space is valuable, and that they might want to try to vacate it, to the extent they can, perhaps by moving to IPv6,” he said. “A market basically tells networks: ‘We will pay you to use v6 instead.’ That’s a transition incentive quite different from anything we’ve seen to date. That’s a transition incentive that just might work.” Economically efficient it might be. But would this mean ordinary Web users having to pay in order to surf Edelman believes not. “If this transition goes smoothly, consumers should never notice. To date, IP addresses have been a trivially small part of the cost of Internet access and Web site hosting. Even if IP address prices increased 100 times, consumers still probably wouldn’t notice,” he said. “The bigger worries come if Internet Service Providers just cannot expand, or just cannot enter the market. If that were to come to pass, I wouldn’t be surprised to see effects on service price and quality.”