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

Scott Leibrand scottleibrand at gmail.com
Fri May 8 15:21:36 EDT 2009

As a matter of economic theory, I think we can assume that the amount of 
IPv4 in service as a result of a transfer is actually a function of the 
price, rather than an independent variable.  Put in microeconomic 
jargon, the amount of IPv4 in service as a result of a transfer is the 
supply, which is a function of the price and the supply curve.  The 
price, in turn, is a function of the supply curve and the demand curve.  
Both such curves represent the amount of IPv4 space that everyone 
(cumulatively) is willing to provide/request at any given price.

If you think about the incentives of an individual ISP, with some 
quantity of IPv4 space, they could be in one of three states: they might 
be willing to pay for IPv4 addresses, if the price is low enough, to 
meet their internal demand for growth.  They might be willing to provide 
IPv4 addresses, at a price, if that price is sufficiently high to 
compensate them for the trouble and opportunity cost of giving them up 
(and switching to a substitute like IPv6, or abandoning marginally 
profitable customers).  Or, they may be in the middle, where they don't 
engage in the market, because the current price isn't low enough to make 
it worth getting addresses, but also isn't high enough to overcome all 
the trouble of releasing IPs.

To get back to your question, the marginal cost to an ISP of providing 
an IPv4 address to a customer should be approximately equal to the 
market price of that IPv4 address on the transfer market, plus or minus 
the transaction costs of freeing up enough addresses to transfer (or 
finding someone else willing to do the same).  So, depending on their 
own particular circumstances, some ISP will pass on an IPv4 address cost 
of approximately the market price, some will pass on less (or none at 
all), and others might be able to pass along a higher price (especially 
if the market price stays low).


Ted Mittelstaedt wrote:
> Hi All,
>   I have a question for everyone's consideration.
>   If a transfer market goes into effect, after 5 years, what would a
> reasonable
> estimate be for the amount of IPv4 in production, that was in production as
> a
> result of a costly org-to-org directed transfer?   And, is it realistic to
> assume that cost of all other IPv4 to the customer will be affected?
>   If for example, after 5 years only .005% of all IPv4 in service
> on the Internet was in service as a result of a transfer, then even if
> /8's are going for 50 million dollars, wouldn't competition pretty
> much mandate that the ISP paying transfer fees be utterly
> unable to pass that cost along to their customers as a surcharge on
> IPv4?
> Ted
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