[arin-ppml] Policy Proposal: IPv4 Recovery Fund

[Leo Bicknell]

In a message written on Sat, Nov 22, 2008 at 08:36:26PM -0500, Milton L Mueller wrote:
> > Needs based maintains a way to get
> > in the door. This is no different than a Lloyds of London checking
> > your bank account to make sure you have the minimum bid in cash
> > before letting you in.
> 
> Even if you concede that ARIN can judge need objectively, (which I
> don't) once the free pool is gone it is not about need it is about
> relative need (he says for the 30th time, hoping it will actually sink
> in this time). 
> i.e., you can easily be confronted with 30 people asking for the same
> block, all of whom meet your "need" criteria. What do you do then? 

If we reach a situation where there is one block and 30 people need
it (not even talking ARIN's need criteria, just they believe they
need it) then we've reached a failure situation, independent of any
of these transfer proposals.

When 29/30 people who need more IPv4 resources go away empty handed
the IPv4 Internet will for all intents and purposes have fully
stagnated.  It matters not if those 29/30 people were turned away
by ARIN, unable to find space on E-Bay, or called a broker and was
told there was nothing to have.

That level of people walking away empty handed will drive a widespread
IPv6 turnover.

No, the interesting case for all of these transfer proposals is
when the supply can meet the demand, that is enough people are
willing to give up space to meet the needs of people who want space.
That is where these transfer proposals are doing any good.  What
people care most about when that is happening is price and safety.
They wants systems that insure they pay as little as possible, and
they want assurances they are getting useful goods and not being
swindled by a crook.

The existing proposals, like 2008-6, fail on both grounds.  Prices
can be kept secret.  One need look no further than our current wall
street mess to see what is able to happen when financial people can
keep information hidden from the market and regulators.  Further, it
allows people to raise prices.  There is also no protection from crooks.
If someone sells you space that turns out to be not their to sell
or has some other problem you have no resource other than to sue the
party, who may have been a fly by night criminal.

This proposal provides protection on both fronts.  Transparency is
required and generated by requiring all transactions to go through
ARIN and for ARIN to report on them.  Someone won't be able to get
away with tricking someone into paying 5 times the market rate, and
by having public pricing competition will drive prices down.
Secondly, since ARIN vets the return of the space and completes
that transaction before giving the space, ARIN can provide assurances
to the receiver that the space is good to use.  In the unlikely
event of a show stopper problem ARIN would even be able to exchange
it for another block.

> I think both you and Owen misunderstood what I meant by brokerages. To
> make my idea simple and clear, let's assume that need is a real gating
> function and no one even enters the game without it. Now assume that you
> have 40 legitimate claims for a /16 and one /16 to give out. If you give
> those things away purely on the basis of FCFS, a brokerage will form
> (just as they do around getting visas from embassies) and charge a price
> for the service of getting you first in line. The brokerage will
> specialize in how your process works. It will figure out ways to game
> the system. (If you want an analogy, think of domain name registrars
> using both software and administrative tricks - like forming 100
> registrars to increase the number of entities with a claim - to enhance
> their chances of being the first to catch expired domain names dropping
> into the free pool.) 

I think perhaps you misread the first come first serve section of the
proposal, or that we didn't explain that clearly.  First come first
serve is used as a auction criteria to help determine the winning bid,
similar to how the dutch auction uses the order in line to set the
winning bid at the lowest bid that would still get part of the goods.
It's not that being first in line means you automatically win, you still
have to bid, and you'll be passed up if you don't.

And I repeat, as above, if we have 40 people in line and one to give
out, none of these transfer proposals keep the IPv4 Internet going.

> > I had discussed an idea with others while writing this proposal to
> > distribute the space via dutch auction.  That is, still needs based
> > to be able to bid, but then everyone in line (potentially 10,000
> > people) bid.  The bids are ranked highest to lowest, and in the case
> > above the 2048th bid is picked.  Bidders 1-2048 then receive space
> > for the bid of 2048th person.  This is also relatively simple to
> > implement; but it has the chance of ARIN ending up with a huge
> > surplus of money.  It can be argued that is good, as ARIN would
> > then have more money to offer to reclaim resources, or it can be
> > argued that is bad, ARIN should not end up making money on this
> > effort.  If you think some sort of bidding scheme like this (in the
> > generic, I'd had to get bogged down in specifics at this point) would
> > make you more likely to support the proposal I'd love to have that
> > discussion.
> 
> Then let's have it! Because yes, it would make me more likely to support
> the proposal. One of the key points I am trying to make is that if ARIN
> insists on controlling all address transfers, then ipv4 scarcity
> requires it to make judgments about relative need or relative value when
> assigning addresses. It will either be you, or a brokered market, or a
> secondary market, but it will happen. It is built into the nature of
> scarcity. 

I would love to hear some opinions from others on this aspect of
the proposal.  Obviously how the "winner" is determined is a critical
point.

I'd also specifically ask you, since 2008-6 is the other proposal
currently on the table if this proposal was amended to have something
like the dutch auction idea would you be more likely to support this
or 2008-6, and why?

> This is not a reasonable concern, imho. Intermediary services arise in
> thousands and thousands of markets and transactional arenas in society
> and have for centuries. You at ARIN don't need to worry your pretty
> little heads about whether buyers and sellers will be able to connect
> efficiently. On the other hand, you DO need to worry about whether ARIN
> will be able to handle the overload and stress associated with setting
> itself up as the compulsory (bottleneck) intermediary for ALL
> transactions. 

I would be interested to get staff input on this point, but today
ARIN handles requests for all IP space.  Given there is likely to
be a limit to supply it would seem likely there will be less
transactions taking place under any sort of a transfer system.  Thus
I find it hard to believe ARIN would not be able to keep up with
the transaction rate.

-- 
       Leo Bicknell - bicknell at ufp.org - CCIE 3440
        PGP keys at http://www.ufp.org/~bicknell/
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