[arin-ppml] Fwd: ARIN-prop-165 Eliminate Needs-Based Justification

[Astrodog]

On Thu, Feb 23, 2012 at 3:59 PM, John Curran <jcurran at arin.net> wrote:
> Milton -
>
>    Is there an fairly straightforward economic explanation that addresses
>    the questions that John Sweeting raised?  If so, could you outline it?
>
> Thanks!
> /John

Sorry for hijacking a bit, but I do have an answer.

>
> From: "Sweeting, John" <john.sweeting at twcable.com>
> Subject: Re: [arin-ppml] ARIN-prop-165 Eliminate Needs-Based Justification
> Date: February 17, 2012 12:55:52 PM EST
> To: Milton L Mueller <mueller at syr.edu>, 'Paul Vixie' <paul at redbarn.org>,
> "jeffmehlenbacher at ipv4marketgroup.com"
> <jeffmehlenbacher at ipv4marketgroup.com>
> Cc: "arin-ppml at arin.net" <arin-ppml at arin.net>
>
> Hi Milton,
>
> A few questions since I am not an expert in markets.  Do you think there is
> a scenario where the largest and wealthiest of the world's ISP's would buy
> up as much address space as they could just to keep it out of the hands of
> their competitors? Or new start ups in their markets?  There are some very
> wealthy companies out there that would not blink an eye at spending the
> money needed to run their competitors out of the market but maybe that is
> not possible in this particular market. Is there a way that a small but well
> of portion of the market could insure prices are so high that the number of
> competitors would be capped or even reduced? As I said I am not an expert on
> markets so would very much welcome your views on this.
>
> Thanks,
> John
> ...

It's very unlikely that large ISPs would make this sort of move for a
number of reasons:

First, it should be noted that even the largest ISPs are not
particularly well positioned financially for this sort of endeavor.
AT&T as an example, has ~$3.2 billion in cash, and after paying
dividends, has lost money somewhat the past few years. When compared
to some of the end users of address space, they simply wouldn't be
competitive bidders, limiting how much of the "for sale" capacity they
could acquire. Aside from this, the largest ISPs cannot cooperate on
their purchases and would be at a significant disadvantage compared to
their large competitors who did not attempt to drive up the price.

It is also notable that large ISPs are not precluded from doing this
under current policy. Simply through changing their address scheme for
CPE, most large ISPs could nearly double their current allocation.
Considering that in 8.3 transfers, they only need to show 24 month
need, most could go significantly past this (for example, planning to
offer customers public IPs for all of their various bits of network
enabled equipment... note that under current policy, they do not have
to actually do this. Merely intend to.) As a result of how rare
auditing is, its unlikely that they would see revocations, either.
Under current policy, a small ISP attempting to become a large one
would face a much greater regulatory hurdle.

I think there is consensus around the fact that long term, IPv4
allocations are likely to have little to no value. As a result, they
are particularly unattractive as speculative investments. Someone
holding a large number of addresses without utilizing them as an
investment is taking a very large risk and would be very unlikely to
hold those addresses for long, due to their value trending to zero.
The same reasons why many of you have expressed... acceptance with
removing needs requirements in a few years would make speculation on
IP addresses today minimal.

Finally, a major way to keep a handle on speculation would be for ARIN
to hold some allocations back, post-exhaustion, with authorization to
release some of those addresses if it appears that an entity is
attempting to "corner the market" at a given point in time. Another
option would be verbiage specifically prohibiting speculation, through
post-purchase auditing. These do not need to occur frequently to
eliminate speculative behavior.

--- Harrison