[arin-ppml] Will the price per IP really be affected by thetransfer market introduced in 2009-1?

[Ted Mittelstaedt]

> -----Original Message-----
> From: arin-ppml-bounces at arin.net 
> [mailto:arin-ppml-bounces at arin.net] On Behalf Of Martin Hannigan
> Sent: Thursday, May 14, 2009 5:34 AM
> To: ARIN PPML
> Subject: Re: [arin-ppml] Will the price per IP really be 
> affected by thetransfer market introduced in 2009-1?
> 
> On Fri, May 8, 2009 at 5:44 PM, Ted Mittelstaedt 
> <tedm at ipinc.net> wrote:
> >
> > Ah, but your point is dependent on how an ISP views it's market.
> >
> 
> [ snip ]
> 
> > If transfer pricing does not rise high enough to make it worthwhile 
> > for orgs to spend the money to renumber out of it, then the orgs 
> > won't, and the transfer market will never come into existence.
> 
> The transfer market already exists.
> 

That statement exhibits the fallacy of petitio principii and doesn't even
justify a response.

> > Thus, let me put my original question a bit differently.  
> How much of 
> > an increase for IPv4 can YOU absorb?  How much do you think your 
> > competitors can absorb?  How much do you think the industry can 
> > absorb?  If it's not a large amount, then how exactly will 
> a transfer 
> > market in IPv4 reach critical mass to enable it to get started?
> 
> 
> You wouldn't  "absorb" anything. If you spent(cost) $10K per 
> month leasing IPv4 address space and that could be correlated 
> to a return on the expense (growth, revenue),

A transfer market, as we have been discussing here, isn't "monthly leasing"
I am not sure where your getting this idea from.

What 2009-1 states is essentially that after ARIN cannot assign IPv4 from
it's pool anymore, that if you want IPv4 you can pay a "directed donation"
cost.  This cost is ON TOP OF what you pay ARIN.

The transfer market is a fantastic thing for ARIN, as a matter of fact, from
a financial standpoint.  The reason why is you will have Legacy holders who
aren't currently paying a yearly renewal fee for their numbers "selling"
some
of their holdings to recipients.

These recipients will have to pay a yearly renewal fee to ARIN to retain the
blocks.

Thus, moving IPv4 space that currently ISN'T paying ARIN ANYTHING, into IPv4
space that IS paying ARIN a renewal.  This is probably why the Board is
pushing
it.

And on top of that, the recipient ISP of the transfer, has to pay a
"transfer fee"
that is over and above the ARIN registration and renewal fees.

> where is the problem?
> 


Let me illustrate with an example.

Suppose it is 2014 and ARIN ran out of IPv4 2 years ago.  You now need more
IPv4.  You pay a million dollars to a legacy holder for a /20 of IPv4 AND
ON TOP OF THAT you start paying ARIN the one-time registration fee as well
as the yearly renewal.

That one-time transfer payment of a million dollars must be paid off
somehow.
So you have to spread it over the cost of all the new customers your going
to bring on to it, for as long a your going to be using that block.

The problem is IPv4 is rapidly disappearing and being replaced by IPv6.  You
are positive that by 5 years later, that IPv6 will be far enough along that
you yourself won't need a lot of your IPv4 holdings.  Of course by then
since
there will be a surplus, you won't be able to re-sell that IPv4 block you
bought.  So your basically now going to have to pay $200K a year for 5 years
to make up that million dollars you paid for the IPv4 block.  How are you
going to pay it?  Well you can raise rates - but as long as your competing
against other ISPs who aren't out of IPv4, you won't get customers to fill
that block up that you bought.

To put it another way, if I "invest" today in 10 pounds of gold for $10,000,
I am not going to make money by cutting the gold into 1 pound blocks and
selling
1 block of gold every year for the next decade for $800 per block.

My question to you is NOT from a theoretical standpoint, but from your own
experiences with your company.  From the ISP's perspective I work for, a 
transfer fee of any significance would not pencil out UNLESS the expected
future usable lifetime of the IPv4 was literally decades. 

The only networks I can see where it would are captive networks.  For
example,
a college university network where they make a central command-and-control
decision to make IPv4 available to students in the dorm, and the costs are
put into the student housing, so the students pay for the IPv4 whether they
need IPv4 or not.

Ted