Subnetting is another method of managing IP addresses. This method of dividing full network address classes into smaller pieces has prevented complete IP address exhaustion. It is impossible to cover TCP/IP without mentioning subnetting. As a system administrator it is important to understand subnetting as a means of dividing and identifying separate networks throughout the LAN. It is not always necessary to subnet a small network. However, for large or extremely large networks, subnetting is required. Subnetting a network means to use the subnet mask to divide the network and break a large network up into smaller, more efficient and manageable segments, or subnets. An example would be the U.S. telephone system which is broken into area codes, exchange codes, and local numbers.

The system administrator must resolve these issues when adding and expanding the network. It is important to know how many subnets or networks are needed and how many hosts will be needed on each network. With subnetting, the network is not limited to the default Class A, B, or C network masks and there is more flexibility in the network design.

Subnet addresses include the network portion, plus a subnet field and a host field. The subnet field and the host field are created from the original host portion for the entire network. The ability to decide how to divide the original host portion into the new subnet and host fields provides addressing flexibility for the network administrator.

To create a subnet address, a network administrator borrows bits from the host field and designates them as the subnet field. The minimum number of bits that can be borrowed is two. When creating a subnet, where only one bit was borrowed the network number would be the .0 network. The broadcast number would then be the .255 network. The maximum number of bits that can be borrowed can be any number that leaves at least two bits remaining, for the host number. 

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