[arin-ppml] ARIN-prop-173 Revisions to M&A Transfer

Lindsey, Marc mlindsey at lb3law.com
Thu Jul 19 18:51:10 EDT 2012

Dear McTim,

Thank you for taking the time to review and comment on my revised proposal. I reviewed all of the previous comments on the PPML and from the staff, and I made several revisions to the prior text in response to those comments.  Below are my responses to some of your specific comments to this latest version.

> 8.1 Principles


> ARIN will not transfer the registration of number resources from one

> organization to another unless such transfer complies with this Section 8.

> ARIN is tasked with making prudent, fair and expeditious decisions

> when evaluating registration transfer requests.


> It should be understood that number resources directly assigned or

> allocated by ARIN are not 'sold' under ARIN administration.

You wrote: The above is correct.  The intent of this policy revision seems to me to be to allow entities that are not ARIN to sell Internet resources.

<<< M Lindsey Reply>>>  Current policy allows entities not subject to ARIN's administration to sell legacy resources so I'm not sure why you would object to the proposal based on this.   Under current policy, holders of legacy space not subject to an LRSA can, if they find a willing buyer, convey their numbers in exchange for money without submitting to ARIN's administration.  Under current policy, the buyers/recipients of those legacy numbers who want ARIN to update its registry database submit to ARIN's administration/records update requirements under 8.3.  This proposed policy does not change the way registration transfers between two parties occur under 8.3.

> The transfer policies in this Section 8 create certain exceptions and

> exclusions for legacy numbers ("grandfather policies").  The

> grandfather policies are intended to satisfy key

You wrote: These seem to be "key" for only a subset of the community.

<<< M Lindsey Reply>>>  Entities that hold legacy resources are stakeholders in number policy whether or not they are ARIN members.  I would counter that those opposed to policies that either (a) liberalize the transfer policies or (b) recognize the distinction between legacy and non-legacy numbers are also a "subset" of the community.  Which subset is larger is an interesting discussion to have over drinks, but I don't think that question has to be answered to adopt policies that fairly balance the subsets' interests (though neither may get all that they want but then that's the nature of constructive compromises).

You wrote: Isn't the effect of the above to be exactly what you say you are trying to avoid? In other words, does this not demotivate holders of early assignments to sign an RSA/LRSA?

<<< M Lindsey Reply>>>  Generally, legacy holders that have not signed the LRSA to date are, as class (I'm generalizing), not motivated to sign.  Forcing them to sign what they otherwise believe is not a good deal in order to update the registration records for the benefit of the entire community in my view has de-motivated such legacy holders from contributing updates to ARIN's database.  And the more inaccurate the database becomes the less useful it will be as a reference tool for routing decisions. If, on the other hand, you believe that the LRSA/RSA is a good deal on its own merits, then forcing legacy numbers through an LRSA/RSA to update the records to document successors of M&A transactions should be unnecessary.  By the way, the LRSA isn't (ordinarily) made available to recipients of M&A transfers of legacy numbers.

> 8.2. Mergers and Acquisitions


> When the transfer of any number resource is requested by the current

> registrant or its successor or assign (the "new entity"), ARIN will

> transfer the registration of such number resources to the new entity

> upon receipt of evidence that the new entity lawfully acquired all of

> the current registrant's rights, title and interest in and to the

> number resources, including assets used with such number resources,

> all as the result of a merger, acquisition, reorganization or name

> change.  ARIN will maintain an up-to-date list of acceptable types of

> documentation. Transfers under this Section 8.2 shall not require: (i)

> the new entity to justify its need for the transferred numbers, or

Your wrote: So if I have the cash I can buy as many blocks as I want with no regard to how they might actually be used in networks?

<<< M Lindsey Reply>>>  I believe you are referring to the elimination of needs assessment.  Your objection, in my view, is too heavily focused on  protecting the community from speculators at the expense of providing members and non-members appropriate flexibility to engage in legitimate M&A transactions.   In a commercial industry (e.g., operating networks for profit) where the cost of acquiring  an important revenue generating input (IP addresses)  is affected by time, supply and demand, there will always be smart people that will take advantage of the pricing curve and information asymmetry.  This isn't speculation, it's smart business. If ARIN goes too far to build up a policy perimeter anticipating a horde speculating number flippers are just over the horizon, I believe that ARIN members (and possibly -but less so -the broader Internet community) will be harmed by a self-imposed siege.

> Rationale


> The current version of 8.2 actually discourages legacy holders from

> (a) updating the registry database, and (b) paying fees to assist with

> records management associated with the ARIN databases.  Some entities

> that currently control resources do not attempt to update the ARIN

> registry records because the current transfer process puts at risk

> their ability to retain and use their numbers.

You wrote: What the current process puts "at risk" is their ability to monetize resources at will.

<<< M Lindsey Reply>>>  I'm not sure I understand the basis of this objection.  I don't believe you object to IP numbers generating revenue for those that hold them.  Most/many network operators that are members of ARIN "monetize" number resources "at will" by packaging/renting them with other services they provide to customers for a fee.   Is the objection based on the assumption that ONLY network operators should be allowed to monetize IP numbers?  But again, this policy proposal is about M&A transactions not transfers of numbers (on a standalone basis) between entities as covered by 8.3.  And current policy already allows number holders to monetize those numbers, including via registration transfers to designated recipients.

> Under the current process, a legacy holder or its lawful successor

> must first prove that it is the lawful successor (which is necessary

> and appropriate).  But it then must also justify its need to continue

> using the numbers it obtained prior to ARIN's existence.

You wrote: yes, this is stewardship.

<<< M Lindsey Reply>>>  This sort of stewardship is adversely affecting ARIN's ability to maintain accurate registration databases.  Shouldn't database accuracy be an important element of ARIN's stewardship?  I also think, as a practical matter, the stewardship approach applied to unallocated resources ought to be different than the stewardship approach applied to non-legacy allocated resources.   It has to be (either by design or effect) different for legacy (allocated) numbers.

> Once the successor entity

> passes the needs hurdle,

Your wrote:  more like a curb than a hurdle.  The bar isn't as high as some rhetoric suggests.

<<< M Lindsey Reply>>>  We can agree to disagree on the size of the curb or hurdle.  I will, however, concede that it may merely be a worn-down speed bump for network operators who know how to optimize the policies.  For others, it's more onerous.   Regardless, can we at least agree in the context of M&A transactions to remove ARIN's curb/speed bump/hurdle from the middle of corporate reorganization / business continuity decisions?

> it is required by ARIN to execute an RSA (not an

> LRSA) as if the numbers were newly allocated from ARIN's  free pool.   The

> RSA (and LRSA) substantially alters the rights conveyed to the

> successor and subjects its numbers to audit and possible revocation

> under then-current policy.  There is, therefore, very little incentive

> for an M&A successor entity to update the ARIN registry database records.

You wrote: routing considerations should be incentive enough.

<<< M Lindsey Reply>>>  Are you suggesting that only those number resources with accurate ARIN WHOIS registration entries are routed?

You wrote:  Does this policy cover non-legacy registrations?  If so I will have to read it a 3rd time ;-/

<<< M Lindsey Reply>>>  The policy removes needs assessment for both legacy and non-legacy numbers conveyed as part of M&A transactions.

> Adopting this policy will minimize the barriers for both legacy and

> non-legacy holders to update the registration databases when changes

> are required to accurately reflect normal corporate reorganization

> activities, which will help increase the accuracy of the registration

> databases, which benefits the community as a whole.

You wrote:  It also seems to fully monetize legacy resources...or have i missed something?

<<< M Lindsey Reply>>>  Yes, I believe you have missed a key point of the proposal.  Legacy resources are being "monetized" under existing policies.  Hopefully, my responses above clarify the intended effect of my 8.2 policy proposal.

* * *
Marc Lindsey
Levine, Blaszak, Block & Boothby, LLP
2001 L Street, NW Suite 900
Washington, DC 20036
Phone: (202) 857-2564
Email: mlindsey at lb3law.com<mailto:mlindsey at lb3law.com>
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