[arin-ppml] Some observations on the differences in the various transfer policy proposals

Tom Vest tvest at pch.net
Mon Oct 20 02:03:00 EDT 2008

Geoff, IMHO, you're simply off base here, both in your specific  
recommendations, and in your claim that there is no relevant  
experience base.

I happen to believe that you've been absolutely true to your  
convictions since RFC 1744. And I recognize that your convictions (if  
RFC 1744 is any guide), or at least your concrete recommendations  
since then, have a solid, principled foundation in libertarian "free  
banking" theories (for those interested, see references below). But  
the fact remains, every time that such theories have been put into  
practice they have failed absolutely, resulting in the imposition of  
national partitioning of markets and regulatory structures, if not  
outright nationalization/operation of the affected industries. There  
is no reason to doubt that anything other than that will result from  
the course of action you're advocating, and numerous specific and  
likely reasons/paths that would lead precisely to that outcome.

One might observe that commercial behavior under the RIR "system" is  
quite a bit like commercial behavior in other sectors where law is  
slack, regulations are mostly post-facto, and commercial transactions  
are largely invisible. Banks are the perfect example. Just like the  
RIRs, the central banks/bank regulators exercise a fair amount of  
control at the time of "bank establishment," when capitalization  
requirements (or in our case, determination of "need" as defined by  
the community) are established. That moment of power itself doesn't  
constrain subsequent bank behavior, however. All it does is establish  
the qualifications of new entrants. However, those qualifications and  
that evaluation process directly determines the bona fides /  
population / rate of population growth of commercial entities that  
will subsequently enjoy substantial power and broad discretion to do  
business in ways directly affect the overall structure of the economy.

Banks perform a critical role in creating liquidity in the monetary  
economy, but if they lend too profligately (e.g., to attract customers  
that might otherwise go to competitors), inflation will result; or  
lend too miserly (e.g., out of uncertainty or a belief that returns  
will be higher at some time in the future), and deflation sets in.  
Commercial operators in our world are in this sense identical. They  
face the same competitive pressures, and the same incentives to  
distribute resources in ways that, in the aggregate, would cause the  
whole "network economy" to collapse -- or more likely to self- 
partition itself into smaller, mutually isolated domains for self- 

In both spheres, self-maintenance structures evolved over time to help  
mitigate the risks that those perverse incentives create, but in both  
worlds those mechanisms are neither omnipotent nor omniscient nor  
infallible. In both spheres, the basic rules preserve an open  
industry, which is supposed to guarantees a level of continuing  
competition that should make the system(s) deliver the things that  
make markets good -- i.e., expanding choice, innovation, an ever- 
improving mix of quantity-quality-price, etc. When they are not  
intentionally closing their eyes, central banks and bank regulators  
also tend to impose additional "reserve requirements" to discourage  
profligate lending, and to require all kinds of periodic reporting in  
an attempt to detect problems before they become catastrophic. We have  
our own reserve rules too -- albeit max. reserve restrictions rather  
than the min. reserve requirements -- and our own limited form of  
reporting, which is mostly tied to subsequent allocations and annual  
membership renewals. For either sphere to endure for long, however,  
the gap between these relatively weak, indirect forms of governance  
and the kind of absolute, all-pervasive iron grip that would be  
required to completely deter system-wide failure from inflation and/or  
deflation -- or routing table "bloat" and/or address hoarding in our  
case -- can only be bridged by the prudence of individual commercial  
operators themselves.

About a century ago, several countries (yours and mine included) went  
through periods when, in place of a central bank, a private consortium  
of commercial operators (aka "bankers' club") administered a kind of  
industry self-governance system of their own. Ultimately these "free  
banking" arrangements all failed (often during times of crisis like  
the one we're now facing), and were displaced by more conventional  
sovereign-backed central banks. Today once again, banks appear to most  
people to have failed to manage themselves, even in the presence of  
central bank regulation. Regardless of the actual causes, I predict  
that financial services providers are a lot more likely to be seeing  
more of that iron grip in the months and years to come than they are  
to receive a renewed mandate to work matters out between themselves.  
The same will happen to our industry too unless we continue  
successfully managing those same systemic risks, as we have been for  
the last decade-plus -- and do so *without* sacrificing any of the  
other engineering-orthogonal values (e.g., industry openness and  
transparency) that have made the rest of the world believe that  
Internet self-governance has been successful.

IPv4 is rapidly dwindling, just as in the past the supply of other  
materials that were essential to the continued functioning of the  
global economy became too scarce to support continued growth. There's  
no denying the need to retool, but the Internet is just as much a  
"critical infrastructure" today as is than the global banking system.  
Industry-led solutions that attempt to buy technical scalability at  
the expense of openness and transparency cannot work -- but even if  
they could they would not stand.

IMHO only,

(plus I have lots of related journal articles for the true insomniacs  
and work-deprived)

On Oct 19, 2008, at 10:24 PM, Geoff Huston wrote:

> Hi Scott,
>>> In your article you imply that the RIRs' registry functions are not
>>> the
>>> proper lever from which to apply the various regulatory functions
>>> that the
>>> community has indicated are needed.  Where/how would you propose the
>>> regulatory function reside / be applied instead?
> Again, the real question is, MUST the RIRs have an answer for
> _everything_? Must the RIR's devise complex procedures that attempt to
> counter particular behaviours,  at the common community cost of more
> onerous procedures with higher overheads. And without any practical
> enforcement mechanism why will others even listen to the RIRs?
> To quote from the article:
> "But the observation should be made that markets in all manner of good
> and services have a rich history in human societies, and the role of
> the regulator is similarly one with a rich history. Market regulators
> exist in many guises and in many regimes, and can exert influence
> through various direct and indirect means. There is no need to believe
> that this issue of transfers and address markets requires a
> comprehensive solution based solely on the resources, capability,
> authority and enforcement authority of the RIR's. Once the RIR's are
> no longer address allocation entities much of their ability to enforce
> certain behaviours goes with that role, and the residual role, that of
> operation of an address registry, necessarily has to take a more
> neutral stance if it is to be a role that is discharged effectively."
>>> Or, to put a more practical face on the same question: how do you
>>> propose
>>> that the industry deal with the deaggregation that will result from
>>> the
>>> widespread transfer of small netblocks (as allowed under prop-50)?
> Thats a very good example, because deaggregation in the address space
> has been a constant factor for decades. i.e. if enforcing strong
> aggregation in the routing space was a metric of success of the policy
> framework associated with allocation, then the metrics of the routing
> system over the past 10 years would have to assign a failing grade  
> here.
> Again, to quote from the article:
> "However, fragmentation of the routing space has not been directly
> linked to the further allocation function, and the results of this
> decoupling of policy with a risk of any negative outcome is clearly
> evident in the continuing fragmentation observed in the routing  
> space."
> So, no, I don't think that any transfer policy proposal will do any
> better than the allocation policy framework, and the allocation policy
> framework has been, on the whole, ineffectual.
>>> I agree that restricting deaggregation through regulating access to
>>> the
>>> registry will not be 100% effective, but it seems more likely to be
>>> effective than any alternative I've seen so far.
> Well with no successful practical experience to call upon so far, I
> suppose that we can all have a guess at what an effective policy may
> be in this area.
> regards,
>    Geoff
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