[arin-ppml] Policy Proposal: IPv4 Recovery Fund

[Milton L Mueller]

> -----Original Message-----
> At some point, perhaps 50 years from now, IPv4 will be on the
> decline.  At that point we will likely return to a simple needs
> based system for those who still need it.  It would be nice if
> whatever system we put in place does not make that transition back
> difficult.

Let me see if I understand what you are concerned about.

If most of the Internet is on v6, and v4 has become something like
DECNet, who the heck cares whether we return to a "simple [sic] needs
based system" for v4? Does ARIN propose to reclaim declining v4 space in
order to become a Smithsonian Institution for obsolete protocols, or a
national park service to preserve old-growth regions of cyberspace? If
so, wouldn't a market transfer system allow it to buy back these rapidly
depreciating resources at low prices? 

But if I misunderstand you and you are talking about the impact of v4
transfers on v6 resource allocations, I can't see the logic here. A
system of transfers for IPv4 addresses has no inherent impact on how
IPv6 resources are handled today, or 50 years from now. 

I think it is obvious that there is no _intrinsic_ value to ARIN's role
as "needs assessor" nor is there any _intrinsic_ value to avoiding the
creation of transferable property rights in v4 addresses. ARIN's
functions, and the property status of addresses, should be determined in
a pragmatic way, they are purely a function of the nature of supply and
demand for addresses, and the technical constraints of the addressing
system. If you don't need needs assessment, don't worry about it. If
more flexibility in the tradability of address blocks helps the Internet
develop efficiently, then do it. You are just so stuck on ideological
constraints, and it is so obvious to outsiders. 

> 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? 

> A brokerage is not going to be able to
> justify need to hold your position in line, need is not "I have a
> lot of money" or "I can dream up a big network".  Rather, ARIN today
> asks for things like signed contracts with transit and transport
> providers to prove you have a network that needs IP's.

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.) 

If that brokerage can deliver on its claim to be able to get you first
in line, the 40 needy applicants simply bid to be the client of the
brokerage, and voila, you have shifted the auction away from ARIN to the
brokerage. But there is still an auction, there is still a market for
the addresses. And it is also likely that certain applicants will hedge
their bets by figuring out ways to position themselves to get in line
before they even have the address need, and then push a button to
manufacture the required need criteria at a strategic time.

> 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. 

So your dutch auction idea is just a sensible concession to the obvious
fact that if ARIN succeeds in buying back unused or underutilized or
unwanted address blocks, it will probably be confronted with multiple
bidders contending for the released space. There will be competition for
the resource. An auction is not simple to design well, but it is
probably going to be a lot simpler than trying to put ARIN in the
position of 

> Lastly on this point, this problem is not limited to this proposal.
> If we consider a proposal like 2008-6, and I am a /8 holder who
> wants to sell my block and all of the bidders want /19's I now have
> to deal with 2048 people and perform some sort of negotiation or
> auction.  Under a proposal like 2008-6 every resource holder will

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. 

> likely do this via different methods with different terms and
> conditions.  This is absolutely the situation that will bring
> brokerages into the system and create overhead.  Companies will not
> be looking for IP's every day, so they will pay someone who does
> it on a day to day basis to know where the best deals are and to
> complete the transaction for them.  This overhead will raise prices
> and reduce transparency.

The level of transparency depends on the availability of data. If ARIN
concentrates on its legitimate function of maintaining a complete and
accurate registry and doesn't try to extend its role to be market
manager and net nanny, it can ensure that the market is transparent.