[ppml] NANOG IPv4 Exhaustion BoF

[Scott Leibrand]

Tom Vest wrote:
> 
> On Mar 6, 2008, at 11:29 PM, Scott Leibrand wrote:
> 

>> I think the main reason legitimate transfers (ones recognized by the 
>> recognized authority on who holds a resource, the RIR) will be favored 
>> by most potential participants due to the reduced risk of using such a 
>> system.  For example, if I need IPv4 space after exhaustion, I could 
>> either go to ARIN, demonstrate to them that I need the space, and have 
>> access to a centralized listing service of transferors, all of whom 
>> ARIN has vouched for as being the legitimate holders of the addresses 
>> they're transferring.
> 
> Okay, all of this holds, but only for (RSA->RSA) transactions, which 
> seem to me to be fairly low probability events until some/many large 
> members are well into IPv6 migration. Of course I could turn out to be 
> wrong, esp. is sidr is very widely adopted by current RSA 
> non-signatories (thereby presumably becoming ARIN members)...

Are you familiar with the legacy RSA?  It's a new version of the RSA 
specifically designed to recognize and preserve most of the rights of 
legacy holders.  I believe that the opportunity to transfer addresses 
will be a strong incentive for many legacy holders (like Jim Frame) to 
sign the legacy RSA.

>> I anticipate that this will prompt a large number of resource holders 
>> to update out-of-date contact information, and will prompt a number of 
>> legacy holders to sign legacy RSAs.
> 
> Although there are probably a few real Rip Van Winkles out there, I 
> think it is more reasonable to assume that most remaining legacy 
> non-signatories are motivated by something other than ignorance of the 
> opportunity to follow the rules. Perhaps the proposed transfer process 
> will achieve such prominence and critical mass that legacy resource 
> holders will waive their self-declared right to do whatever they want 
> with their resources. Perhaps none of them will find it more 
> convenient/profitable to sell around the official mechanism and its 
> rules. I wonder how high "white market" prices will have to go for all 
> of these assumptions to hold true (note: foreshadowing for the new 
> entrants point below)...
> 
> Perhaps no RSA signatory will be tempted to jump the queue and trawl the 
> gray market.

I think the incentive for legacy holders to use the white market will 
be, quite simply, that prices are higher and there are more buyers 
there.  The reason for this will be because potential transferees have a 
strong incentive to ensure that they are recognized as the proper holder 
of the addresses they've paid for.  The black market won't be able to 
provide that, so prices will be lower there, and the only addresses 
supplied at lower prices on the black market will be from address 
holders who can't prove to ARIN that they're the legitimate holder of 
the addresses.

> Perhaps all are willing to continue abiding by needs-based 
> allocation rules, even if that means that the wait for address space 
> could be very long.

Why would anyone have to wait for address space?  If they're willing to 
pay the market price for it, there should always be space available.

> But if that's so, there are probably better 
> mechanisms to leverage this will to coordination that are less risky and 
> volatile and unpredictable...

There definitely will be some volatility to a market solution, but I 
think it actually manages risk and predictability pretty well.  There 
certainly are a lot of economists and financial folks who've developed 
all the tools we could possibly need to understand the market and 
predict what it's likely to do, especially as things actually start to 
play out.

>> I don't anticipate that a market will price out new entrants.  In 
>> fact, I favor the transfer policy proposal precisely because it 
>> provides an avenue for new and growing networks who need IPv4 space to 
>> get it after free pool exhaustion.
> 
> 
> I concede that Richard Branson will always be able to start a new ISP if 
> he wants to, so in principle the industry will always remain "open" in 
> some trivial sense. The kind of "open" I was referring to was the more 
> functional/pragmatic kind -- i.e., the kind that mollifies internal 
> critics and makes them more likely to identify their interests with 
> community and its institutions rather than an aspiring competitor, the 
> kind that persuades anti-trust authorities to move on, because there's 
> nothing to see here...

I think you're making an unsubstantiated assumption that prices in a 
transfer market will get extremely high.  But as long as decent 
substitutes (IPv6, NAT, etc.) exist for some fraction of the IPv4 
address holders, the price will never get higher than the marginal cost 
of freeing up IPv4 addresses.

>> In my opinion, the supply curve for IPv4 addresses will be somewhat 
>> elastic, meaning that as the price goes up many IPv4 address holders 
>> will begin to free up IPv4 addresses and make them available.
> 
> I agree, but I believe that there are better, less volatile, more 
> sustainable methods to leverage that elasticity, so that the needs-based 
> allocation regime and all of the collateral values that have gotten a 
> (largely unnoticed) free ride on it over the last decade can be preserved.
> 
>> Demand will be elastic as well (quantity demanded will go down as the 
>> price increases),
> 
> I agree here too, but I believe that there are better, less volatile, 
> more sustainable methods to manage that elasticity so that it is spread 
> across all resource users rather than killing the newest/smallest first.

As per above, I don't think a transfer market will price out ("kill") 
new/small entrants.  Rather, their cost of acquiring new IPv4 addresses 
should be about what it costs the next legacy holder or IPv6-adopting 
ISP to free up addresses.

I'm still not convinced that there exists a better way to make 
additional supply of IPv4 addresses available.

>> but I think supply will be more elastic than demand simply because 
>> there are so many netblocks out there already,
> 
> (in the gray)

Many of which are held by legacy holders, yes, but as I argue above, a 
transfer policy will give them a strong incentive to sign a legacy RSA 
so they can transfer the space without having to fake a corporate 
acquisition.

>> so address conservation efforts will have more effect on freeing up 
>> supply to be transferred than on reducing the demands for new space.
> 
> We are in 100% agreement here again.
> The trick is to marshall price signals to induce this kind of behavior 
> sooner rather than later, and to keep the resulting address 
> recirculation process more effectively tied to needs-based delegation 
> principles. So long as the price/heat continues to go up evenly across 
> all resource users, the effects on migration out of v4 should be the 
> same. Given that, all that's really necessary is to keep everyone 
> approximately equally happy/unhappy but *together* through the full 
> (long) transition -- e.g., from gated v4/v6 coexistence to LISP or some 
> other, similarly durable/scalable future arrangement.

Unfortunately, I think we have too many disparate types of IPv4 address 
holders (particularly legacy and non-legacy) to put everyone back in the 
same boat.  Therefore, we're stuck with the next best thing, which is 
providing everyone the same incentive to free up addresses.

-Scott