[ppml] NANOG IPv4 Exhaustion BoF

Scott Leibrand sleibrand at internap.com
Thu Mar 6 12:11:08 EST 2008

In the past I've used the analogy of Manhattan real estate: it's 
definitely unique, and has only imperfect substitutes elsewhere, as IPv4 
is unique, with its own unique demand, and IPv6 is an imperfect substitute.


Tom Vest wrote:
> On Mar 6, 2008, at 7:54 AM, Jim Weyand wrote:
>> 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-
> Hi Jim,
> Thanks for the response.
> Neither Iowa farmland, nor farmland nor land more generally are good  
> analogies, at least not in the present age.
> Unless you postulate a situation in which potential buyers and  
> sellers are (almost) completely immobile --  e.g., in the pre-modern  
> era -- all of the above are "substitutable" -- i.e., you can still be  
> an agro producer without it, you can still be an agro consumer  
> without it. And unless you postulate a time in which land had some  
> unique, extra-economic significance --  e.g., in the pre-modern era  
> -- then possession of it doesn't confer any special significance that  
> is not substitutable with some other economic asset/activity.
> In the end, if landowners in Iowa have to compete for investment  
> dollars with landholders (and other asset owners) elsewhere, then  
> that puts an upper bound on the demand, and hence the price, and  
> hence the appeal of hoarding rather than immediately selling, for  
> Iowa land. On the other hand, if Iowa land was the last land on  
> Earth, and not completely substitutable for any aspiring agro  
> producer or consumer on Earth, then you'd probably rarely see it on  
> the market, and never see it at all at a price or in tracts big  
> enough to permit new farmers to enter the market. Making this even  
> worse, if you happened to know that agro production would be getting  
> much more efficient in the near future, so that smaller and smaller  
> parcels might be economically viable (and hence marketable), you'd be  
> even less likely to sell at any price now.
> (we actually covered this in the course of the NANOG thread --  
> apologies again for duplication)
> TV
>> 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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