let's say i have 2 routers connected to SP with EBGP and we are using /26 for this connectivity.
Now let's say i have some requirements and limitation on my internal networks where i need to assign IPs from the same range to internal devices BUT i can't forward them over the same subnet.
in this case can i subnet the network from my side further ?
for example can we do the following case:
From Service Provider side for Point to Point connectivity:
HSRP IP: 192.168.50.1/26
Now from my side can i use: /27 on the point to point links ? and then on the internal networks use /29 ?
X Device 1: 192.168.50.4/27
X Device 2: 192.168.50.5/27
then on the internal device i configure /29. so this way the internal device will be able to pass the X devices because they use different subnet and at the same time they will be able to reach the PEs because the PEs configured with large subnet (/26)
1) Would this scenario work ?
2) If it works, would that save any IPs or maximize the use of that subnet ?
In this case, proxy ARP works when the ISP's router has a broader subnet mask than yours does. If the ISP is running a /26 and you're running a /29, their router will ARP for anything that falls within the /26 because it considers the whole subnet to be directly connected. If you have proxy ARP enabled on your router's ISP-facing interface, it will reply with its own MAC address for these addresses. The ISP router will then forward the Ethernet frame to your router, which will route the packet normally.
It's not normally recommended except in isolated circumstances (subnet mask transition, VPN pools on an Ethernet interface, &c) because it creates unnecessary network traffic and opens up the potential for spoofing... but it might work in this case.
Further information can be found here: Proxy ARP - Cisco