[ppml] NANOG IPv4 Exhaustion BoF

[Jim Weyand]

Tom-

This is an interesting example, but instead of using a market of a
produced commodity like grain or steel do the same thought experiment
with a market for something fixed like farmland in Iowa.  It isn't a
perfect analogy but it eliminates the producer incentive.

Tony-

I agree 100%, as counter-intuitive as it sounds, we need speculators in
this market.  Hopefully we can attract a reasonable number of
speculators that will compete with one another and actually deliver
lower prices.  In an active, vibrant market the price for a block of
addresses will be quickly and fairly determined.

It is my belief that open market with minimal constraints will result in
the best balance and fairness between sellers and buyers of address
space.

That said I continue to support Scott's proposal, Policy Proposal
2008-2: IPv4 Transfer Policy Proposal with its constraints and the
resulting additional costs because that may prove to be more politically
acceptable. Even a constrained market is far better than no market at
all.

-Jim Weyand

> -----Original Message-----
> From: ppml-bounces at arin.net [mailto:ppml-bounces at arin.net] On Behalf
Of
> Tom Vest
> Sent: Thursday, March 06, 2008 9:22 AM
> To: tony.li at tony.li
> Cc: 'Randy Bush'; 'Public Policy Mailing List'
> Subject: Re: [ppml] NANOG IPv4 Exhaustion BoF
> 
> 
> On Mar 6, 2008, at 12:47 AM, Tony Li wrote:
> 
> > |i would be interested in hearing if speculative purchasing would
> > have a
> > |signature we could detect and use to ameliorate speculation in some
> > |fashion.
> >
> > If I remember my econ classes (from oh so long ago ;-), speculative
> > trading
> > is actually beneficial to the market in that it helps provide a
> > buffer for
> > supply.  Hoarding is the behavior that we would want to really
> > detect and
> > avoid.  Someone trying to corner the market in v4 space would be
bad.
> >
> > Tony
> 
> Hoarding in the behavior you should expect. This will be true unless/
> until IPv6 is actually fully substitutable for IPv4, for both
> existing and aspiring number resources users.  Until then any
> "rational" IPv4 seller will know that they'll be able to sell the
> same, if not a shorter prefix at a higher price tomorrow, and also
> that they will have to pay even more if they find they they need the
> IPv4 back again after that. So the only people who might contribute
> to IPv4 liquidity (i.e., after the first/last sale of truly idled
> address space) are going to network operators that know they'll never
> need more IPv4 ever again.
> 
> For them however, the prospect of empowering new/existing competitors
> by making essential inputs available is going to provide an
> additional gating factor influencing number and length of prefixes
> offered, as well as asking price (c.f., the market for dark fiber).
> 
> Reposting below from NANOG, with apologies to those who will be
> seeing this for the second time.
> 
> TV
> 
> Begin forwarded message:
> > From: Tom Vest <tvest at pch.net>
> > Date: February 18, 2008 9:26:03 PM PST
> > To: nanog at merit.edu
> > Cc: Rod Beck <Rod.Beck at hiberniaatlantic.com>, Iljitsch van Beijnum
> > <iljitsch at muada.com>, David Conrad <drc at virtualized.org>, Brandon
> > Galbraith <brandon.galbraith at gmail.com>
> > Subject: Re: IPV4 as a Commodity for Profit
> >
> > It's good that this discussion is happening now.
> > To make the discussion as productive as possible, it's probably a
> > good idea to clarify assumptions and terms.
> > We all know what "market" means -- but in all likelihood many of
> > the things we all "know" do not overlap, and some are probably
> > mutually contradictory.
> >
> > If thinking about IPv4 addresses as a "commodity" has any validity,
> > it comes from the assumption that making them subject to "market
> > pricing" will increase supply, i.e., incentive current surplus
> > holders to make that surplus available to would-be buyers.
> >
> > In other "commodity" markets, the connection between market pricing
> > and increased supply is *production* -- i.e., when the revealed
> > price of a commodity goes up, those who are capable of making it
> > are motivated to make more, or to jump into the market for the
> > first time. In other commodity markets, that motivation is bounded
> > by the threat of alternative suppliers, by the impracticality of
> > hoarding, and by the inability of the potential seller to use more
> > of the commodity directly. In other words, the existence or
> > potential emergence of alternative producers/suppliers tends to
> > discourage hoarding to maximize prices (because there's no
> > guarantee that prices will stay high, much less go even higher),
> > and the lack of direct "use value" reduces any countervailing
> > incentive that the prospective seller to just hold the assets in
> > perpetuity, until they can be used in-house.
> >
> > In the case of IPv4 addressing, none of these bounding conditions
> > apply. No more IPv4 addresses can be produced, and they're almost
> > certain to have unique (if not irreplaceable) use value, at least
> > for some classes of ISPs that exist today, for at least a decade or
> > more (or as long as those kinds of ISPs exist, whichever is
> > shortest). That means the potential price is always going to be
> > higher tomorrow than it is today, right up to the day before the
> > last day that IPv4 becomes useless. Which means hoarding is going
> > to continue to be the most sensible behavior for all surplus
> > holders -- even those that no longer have any Internet-related ops
> > or business interests.
> >
> > This countervailing incentive is much stronger for surplus holders
> > that *do* still have such interests. Knowing that IPv4 addresses
> > that they might need in the future will certainly cost more (maybe
> > lots more) than whatever price they could command for surplus IPv4
> > today, growing ISPs are not likely to contribute much to the
> > salable, "liquid" address pool. Worse still, so long as IPv4
> > continues to be a non-substitutable, must-have input for certain
> > kinds of ISPs, ISPs like that will know that the threat of
> > competition from existing or hypothetical future competitors will
> > be absolutely limited by the availability of IPv4 address space.
> > For them, making IPv4 address space unavailable to competitors is a
> > perfectly sensible "use", and one with quite a lot of value.
> >
> > An unmediated market is not going to "work", for almost any meaning
> > of that term. Get over it.
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