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Business Case for IPv6 – The Network Effect

April 14, 2011 - 0 Comments

Mark Townsley opened the inaugural V6 World Congress 2011, a 3-day conference on IPv6 Internetworking, with a keynote discussion on the business case for IPv6. One of his key messages was to do with the fact that there is strength in numbers, according to the Network Effect. Thus critical mass is required for the transition to begin in earnest and for the eventual switch to IPv6 to come to true fruition.

Theodore Vail of Bell Telephone discovered and learned how to harness the powers of a mathematical equation that describes “The Network Effect” more than 100 years ago as evidenced by the world wide telephony network. In simple terms, the Network Effect states that the more connections (or people) working together in a network, the more robust and more valuable it becomes. Extrapolating this information to the modern day Internet and further the IPv6 Internet we, indeed, believe the future of the Internet is in our hands and it is up to us to join together as a network of participants to keep it going. Such was the spirit of the participants at V6 World Congress, one of realization in how they are all working together to ensure the continued growth and success of the Internet.

The heart of the Internet is technological growth. With IPv4 on the way out, this growth is prone to being stunted. The basis of a study by Dimitri Zenghelis from Cisco IBSG, finds that “network technology has the potential to boost economic growth, sustainably enriching poorer societies.” If the Internet lacks the ability to expand and grow, a likely outcome will be that the innovation we have come to expect will become more and more difficult to achieve, potentially causing the world economy to lose the monetary sustenance it derives from the Network Effect.

The last of existing IPv4 addresses have been allocated by IANA and IPv4 exhaustion is near, yet according to Google Trends there is more published on the web about disabling IPv6 than enabling it. It is time for IPv6 to leave the laboratory and enter the mainstream, and we’re already seeing this occur. However, for this to be successful, engineers have to take the work they have already done and cross the finish line by eliminating the remaining incentives to disable IPv6. This includes production quality IPv6 as well as Internet connected devices doing more than simply enabling IPv6, but by being active in terms of switching between IPv6 and IPv4.

The transition to IPv6 is necessary to ensure future Internet functionality and the longer we neglect it, the more difficult the task will be. In economics and business, a network effect (also called network externality or demand-side economies of scale) is the effect that one user of a good or service has on the value of that product to other people. When network effect is present, the value of a product or service increases as more people use it. People want their investments to become more valuable and they become more valuable as more people invest. IPv4 benefitted from this, and IPv6 must as well; if only few deploy IPv6, the network effect may never take off and achieve its own momentum.

One thing evident at the v6 World Congress was representation from creators and consumers of IPv6 traffic from diverse market segments. This is what is necessary for a Network Effect to be triggered. Even when acting on our own interest, if it is toward the same network protocol we are increasing the investment for all, triggering a virtuous cycle of adoption.

The IPv6 transition is likely to last several years, but can be broken down into the following 3 basic steps:

1. Preserve: Preserve the few remaining IPv4 addresses and distribute them appropriately.

2. Prepare:  Prepare and maintain a broad dual-stack technology.

3. Prosper: Total IPv6 functionality, eventually leading to the sun setting of IPv4.

We as a global community must take advantage of the elegance of predictability that mathematics allow us. The network effect is mathematically described by Robert Metcalfe and is commonly referred to as Metcalfe’s law. Metcalfe’s law states that the value of a telecommunications network is proportional to the square of the number of connected users of the system. Beckstrom’s Law, which takes the network valuation one step further is stated as follows:

The value of a network equals the net value added to each user’s transactions conducted through that network, summed over all users.

We can use trends that have been astonishingly, historically, accurate to predict and plan for the future. A final example of network technology valuation and predictability is described in Moore’s Law, which applies to silicon-based integrated circuits (IC). It roughly states that every 18 months the speed of calculation, and the amount of memory double, while the price of an IC halves in a commercially available chip. This characteristic of solid state devices has been consistent since the 1950’s and is expected to remain that way until at least 2015 – 2020. As a result, the industry has been able to plan ahead and see into the future. The current situation with IPv6 is reasonably analogous; such is the case with the Network Effect as applied to IPv6.

IPv4 exhaustion being a fact, the telecom industry would be well served to provide IPv6 services as soon as possible. The solutions must allow an easy migration path from the existing installed base to an IPv6 enabled network. Mark not only provided the Business Case for IPv6, in a single slide he laid out the set of IP Transition Solutions that provide the basis for that migration.

The question is no longer if IPv6 is going to find its rightful place… but when.

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