IPv6 cost estimates for ISPs: Part 2

A new study estimates that U.S. service providers will spend $136 million over the next 25 years in the transition to IPv6, a long-anticipated upgrade to the Internet’s main protocol.

RTI International conducted the study on behalf of two arms of the U.S. Commerce Department: the National Institute of Standards and Technology (NIST) and the National Telecommunication and Information Agency (NTIA).

The RTI study is the first to put a price tag on the cost to U.S. businesses of migrating to IPv6.

IPv6 promises easier administration, tighter security and an enhanced addressing scheme when compared to IPv4, the Internet’s current protocol. IPv6, which uses a 128-bit addressing scheme, supports a virtually limitless number of uniquely identified systems on the ‘Net, while IPv4 uses a 32-bit addressing scheme and supports only a few billion systems.

Migrating to IPv6 will require service providers to upgrade all of the hardware and software used in their Internet provisioning networks as well as their internal networks. RTI estimates it will cost service providers $120.7 million to upgrade customer-facing networks and $15.3 million to upgrade internal networks.

RTI breaks down the costs for ISPs to upgrade their networks (external and internal) as follows:

* Training: 34.6%

* Network management software: 20.5%

* Network testing: 19.5%

* Maintaining network performance: 13.1%

* Installation effort: 12.3%

RTI says ISPs will make most of their investment in the year leading up to IPv6 transition, with some continuing costs for up to five years after the transition. When that transition will occur is unclear.

“At this point, there is very little demand in the U.S. for IPv6; therefore, many ISPs are not currently offering IPv6 connectivity because they do not want to incur costs without a clear ROI,” the RTI report says.

RTI says many ISPs are testing IPv6 and offering limited service. These ISPs will not offer commercial services until six months to a year after customers start demanding the capability. By that time, most ISPs will have IPv6 built into their major hardware and software components so that additional equipment costs should be minimal.

The good news for ISPs in the RTI report is that end users will carry the lion’s share of the cost of upgrading to IPv6. RTI estimates that U.S. businesses will invest $25 billion over the next 25 years to migrate to IPv6. ISPs will carry $136 million of that amount, while users carry $23.3 billion. Hardware and software vendors will carry the rest of the IPv6 investment.

RTI conducted this study by interviewing representatives of ISPs, end users, hardware and software vendors. The RTI study provides a cost-benefit analysis of the conversion to IPv6.

The RTI study follows last year’s mandate by the Office of Management and Budget (OMB) that all federal agencies must run IPv6 on their network backbones by June 2008. The Defense Department issued a similar mandate in 2003 to have all military networks transitioned to IPv6 by FY 2008.

In our next issue of the Service Provider newsletter, we’ll look at RTI’s estimates of the end user costs of IPv6 migration more closely.

To read the RTI report, click here.