[arin-ppml] 2008-6: Emergency Transfer Policy for IPv4 Addresses

[John Curran]

On Oct 1, 2008, at 4:32 PM, Matthew Wilder wrote:
> ...
> 2) Externality:
> In economic terms, externality is the cost is incurred outside of a  
> closed transaction.  Liberalized IP Address Transfer would result in  
> considerable externality outside of the parties who transfer the  
> resources.  Not to mention that there are at least two transfers in  
> the case of successful brokerages who will firstly buy a resource,  
> then secondly sell that resource off.  Or what if they buy a single / 
> 16 and split it up into 16 /20 subnet, which results in 17  
> transactions from one original resource, not to mention the routing  
> table explosion it causes.  Will the bystanders be compensated for  
> their incurred cost?

Matthew -

    There's little doubt that in a perfect world, a free market will  
result in
    an efficient distribution of resources.  Of course, under such  
conditions,
    one could claim that a benevolent dictatorship or planned economy  
will also
    work just as well.

    The significant issue with straight free market approach to IP  
address
    distribution is precisely the externality point you cite above.   
At present,
    the actual cost incurred from making use of a particular address  
blocks is
    not clearly passed back to those receiving the benefit.  Making  
use of an
    IP address block in the public Internet requires routing it, and  
while this
    results in costs to every default-free network in the Internet,  
there is no
    system in place to provide settlement of these additional costs,  
and it is
    instead handled indirectly by providers through peering  
negotiations.

    Combine this with the underlying requirement of hierarchical  
assignment which
    allows Internet routing to work (to the extent that we call it  
"working" today)
    and we're got a system which can't survive deaggregation but lacks  
a working
    feedback mechanism back to those who wish to obtain (and route!) a  
very small
    but unique IPv4 address block.

    Turning on a free market for IPv4 address blocks requires some  
degrees of
    faith that the ISP community will either not allow use of smaller  
and smaller
    blocks or will quickly establish some corresponding system for  
settlement of
    resulting external routing costs.

/John
(my personal view only)