Margit Vanberg, IP addresses, autonomous system numbers and the domain name system in:

Margit Vanberg

Competition and Cooperation Among Internet Service Providers, page 47 - 49

A Network Economic Analysis

1. Edition 2009, ISBN print: 978-3-8329-4163-5, ISBN online: 978-3-8452-1290-6

Series: Freiburger Studien zur Netzökonomie, vol. 14

Bibliographic information
47 col/Internet Protocol (TCP/IP), which became very influential for the development of the Internet because of its property of functioning in very different kinds of networks and guaranteeing the compatibility of these diverse networks. In 1978 the first functioning version of the TCP/IP protocol, TCP/IPv4, was released. The principle idea of the TCP/IP protocol suite is to connect independent packet-switched networks by so-called gateways or routers. The routers are computers specialized in the forwarding of data packages. They understand the protocols by which the hosts in their home network communicate and follow a common standard for the communication with routers of neighboring networks. TCP/IP is a whole protocol family. The two main protocols of this protocol suite are the Transmission Control Protocol (TCP) and the Internet Protocol (IP). Among other things, the TCP protocol is responsible for opening and closing a connection, for providing flow control, i.e. how fast to send data, and for checking that transmission was successful (Comer, 2006: 187ff.). The IP software is responsible for forwarding data packages in the Internet (Comer, 2006: 73ff.). It divides the data stream into packets and provides each package with information such as the source, the destination, an indication which packages are part of one message, whether there are more packages to come, and the order of the packages belonging to one data stream. With this information the packages are recompiled in the order of the original message once they reach their destination. TCP/IP became the official standard of the ARPANET in 1983; and the NSFNET later also adopted TCP/IP as its standard communications protocol. TCP/IP has since remained the standard of communication in the Internet; in fact, the Internet is often set equal to computer-networking via TCP/IP.34 The following sections will explain in more detail the addressing system and the method of data transmission in a TCP/IP network. 3.4.3 IP addresses, autonomous system numbers and the domain name system Communication in networks presupposes that each user can be uniquely identified. In the Internet, this function is fulfilled by the so-called IP address, which encodes information on both the home network (in the network prefix) of a host as well as the host itself (Comer, 2006: 42). The Internet Corporation for Assigned Names and Numbers (ICANN) grants IP addresses to regional Internet registries, which in turn assign blocks of IP addresses to large ISPs.35 These ISPs finally assign IP-addresses to large customers (other ISPs or corporations). For private customers ISPs often use dynamic address allocation, assigning a public IP address only for the duration of an online session (see Comer, 2006: 355). This practice preserves IP addresses when an ISP has been assigned only a limited address block. A small ISP with many dial-in- 34 See, for instance, the definition of the term “Internet” by the Federal Networking Council, cited in chapter 2 above. 35 See for details; site last visited on Feb. 15, 2008. 48 users will, for instance, use a private addressing scheme for internal routing and assign a public IP address to a specific host only when a user begins an onlinesession. When return-packets to this IP address arrive, the private address to the user’s host is inserted in the destination address field for the purposes of internal routing. The format of an Ipv4 address,36 the current addressing scheme in the Internet, is a 32-bit numeric code. The dotted decimal notation of this code can be translated into four numbers in the range from zero to 255, separated by periods.37 For example, is the IP address of the site To facilitate the forwarding of data packages within the Internet, there exists the possibility that a group of networks is grouped into an autonomous system (AS) and treated as one large network vis-à-vis the rest of the Internet. ASs are assigned unique AS numbers by the regional Internet Registries.38 These AS numbers are propagated in the Internet together with the information which networks can be reached via the AS.39 There are thousands of ASs in the Internet. Each AS has control over a block of IP addresses. At least one router per AS is designated to communicate with neighboring autonomous systems. The router collects information on the networks within its own AS and exchanges this information with the routers of other ASs. From other routers it learns through which ASs other networks can be reached. In practice, the large ISPs active in the Internet are all ASs. Within their AS, which includes private customers, large customers with own networks, and also smaller ISPs, these large ISPs can choose their routing architecture independent from the rest of the Internet. IP addresses were designed for computer programs to locate other computers in the Internet. For human Internet users, addresses corresponding to pronounceable names are easier to use and remember. For this purpose the Domain Name System (DNS) was invented in 1983. It is an Internet directory which translates IP addresses into pronounceable domain names (Comer, 2006: 419ff.). 36 Ipv4 refers to the Internet Protocol version 4. 37 A new generation of IP addresses, Ipv6 addresses, was released beginning in 1999. However, uncertainties about the impact that the use of IPv6 will have on today’s routing logic have prolongated the process of switching to this new addressing-scheme (Dierichs and Pohlmann, 2005: 125). Furthermore, the predictions that the IPv4 addresses would be exhausted before the year 2000 have been proven wrong. Today, experts predict that IPv4 addresses will suffice until around the year 2020 (Comer, 2006: 128). 38 According to Dierichs and Pohlmann (2005: 124), the Reseaux IP Européens, Internet registry for Europe, manages 10,114 AS numbers, of which 6,464 are used in the public Internet and 2,450 are used internally by ISPs. 39 Smaller ASs, which are connected to the rest of the Internet by only one larger provider (single-homed AS or corporation) also use private AS numbers allocated by their provider. This AS number is not propagated in the public Internet. Rather, the upstream ISP uses the AS number for internal routing and advertises the IP addresses of the sub-net as included in its publicly announced AS number. 49 The name space of the DNS is organized hierarchically. Top-level domains (country specific domains such as .de and .uk and generic domains such as .edu, .gov) are rare. They are approved by the Internet Corporation for Assigned Names and Numbers (ICANN) and administered by top-level domain administrators. These administrators in turn grant sub-domains to commercial organizations, academic institutions, government ministries, etc., which in turn receive the authority to grant further sub-domains in their zone. Internet Domain names are written with the most local domain label first and the top-domain label last. The labels of the domain names are separated by a period. The organizations responsible for a domain or a subdomain propagate the information on their domain names and the corresponding IP addresses on authoritative DNS servers. An institution will only be granted a second-level domain if it will operate a name server for this domain according to Internet standards (Comer, 2006: 439). The DNS servers are geographically distributed in the Internet. These servers use specialized protocols to cooperate in mapping domain names to Internet addresses for all domain names in the public Internet. Computers attached to the Internet access a DNS server to translate a URL40 or an E-mail address into an IP address needed for forwarding the data. 3.4.4 Routers and routing The information on the location of a specific network host in the Internet, given by the IP address, is evaluated by specialized computers, called routers. Routers are situated at network nodes and interconnection points where the networks making up the Internet interconnect. These routers have the function of forwarding data packages across network boundaries according to rules specified in so-called routing protocols. When more than one possible path to the final destination is available, routing refers to the process of deciding on a specific route.41 It is necessary to explain the process of routing in more detail here, because the routing functions performed by the different ISPs active in the Internet are the central differentiating characteristics between ISPs to be discussed in the subsequent chapters. The following description of routing differentiates between routing within autonomous systems, where traffic is directed according to the IP address and routing between autonomous systems, where traffic is forwarded using the AS number. Routing within autonomous systems Package-forwarding within autonomous systems follows the principle of “next-hop routing.” A router does not know the complete path to the final destination, but only the next router along the way to the final destination. A router evaluates the destination IP address of any incoming package and sends the package along to the next 40 URL stands for Uniform Resource Locator, a technical term for web-address. 41 More recently the term “forwarding” has become more common than “routing” (Comer, 2006: 93).

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Die Konvergenz der Netztechnologien, die dem Internet, der Telekommunikation und dem Kabelfernsehen zu Grunde liegen, wird die Regulierung dieser Märkte grundlegend verändern. In den sogenannten Next Generation Networks werden auch Sprache und Fernsehinhalte über die IP-Technologie des Internets transportiert. Mit den Methoden der angewandten Mikroökonomie untersucht die vorliegende Arbeit, ob eine ex-ante sektorspezifische Regulierung auf den Märkten für Internetdienste wettbewerbsökonomisch begründet ist. Im Mittelpunkt der Analyse stehen die Größen- und Verbundvorteile, die beim Aufbau von Netzinfrastrukturen entstehen, sowie die Netzexternalitäten, die im Internet eine bedeutende Rolle spielen. Die Autorin kommt zu dem Ergebnis, dass in den Kernmärkten der Internet Service Provider keine monopolistischen Engpassbereiche vorliegen, welche eine sektor-spezifische Regulierung notwendig machen würden. Der funktionsfähige Wettbewerb zwischen den ISP setzt jedoch regulierten, diskriminierungsfreien Zugang zu den verbleibenden monopolistischen Engpassbereichen im vorgelagerten Markt für lokale Netzinfrastruktur voraus. Die Untersuchung zeigt den notwendigen Regulierungsumfang in der Internet-Peripherie auf und vergleicht diesen mit der aktuellen Regulierungspraxis auf den Telekommunikationsmärkten in den Vereinigten Staaten und in Europa. Sie richtet sich sowohl an die Praxis (Netzbetreiber, Regulierer und Kartellämter) als auch an die Wissenschaft.