[ppml] NANOG IPv4 Exhaustion BoF

Tom Vest tvest at pch.net
Thu Mar 6 14:33:50 EST 2008

Hi Scott,

I agree that you got the substitutability comparison right -- the  
same could be said about real estate in any one place that you really  
cared about -- but it's a trivial comparison. Manhattan real estate  
is not really essential to anything important. Even a diehard New  
Yorker couldn't credibly claim that living/working in NYC is  
equivalent in importance to preserving/growing the Internet through a  
difficult transition.

However, if everyone strongly disagrees I imagine we could get Donald  
Trump to help refine the transfer proposal ;-)


On Mar 6, 2008, at 12:11 PM, Scott Leibrand wrote:

> 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.
> -Scott
> 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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