Policy Proposal: IPv4 Recovery Fund

[Member Services]

ARIN received the following policy proposal. In accordance with the ARIN
Internet Resource Policy Evaluation Process, the proposal is being
posted to the ARIN Public Policy Mailing List (PPML) and being placed on
ARIN's website.

The ARIN Advisory Council (AC) will review this proposal at their next
regularly scheduled meeting. The AC will assign shepherds in the near
future. ARIN will provide the names of the shepherds to the community
via the PPML.

In the meantime, the AC invites everyone to comment on this proposal on
the PPML, particularly their support or non-support and the reasoning
behind their opinion. Such participation contributes to a thorough
vetting and provides important guidance to the AC in their deliberations.

The ARIN Internet Resource Policy Evaluation Process can be found at:
http://www.arin.net/policy/irpep.html

Mailing list subscription information can be found at:
http://www.arin.net/mailing_lists/

Regards,

Member Services
American Registry for Internet Numbers (ARIN)


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Policy Proposal Name: IPv4 Recovery Fund

Author: Leo Bicknell

Proposal Version: 1

Submission Date: 21 November 2008

Proposal type: New

Policy term: Permanent

Policy statement:

(Create new section in section 4, which would be 4.10 based on the
current NRPM):

4.10 IPv4 Recovery Fund

4.10.1 Implementation Timing

       Upon receiving a valid request for a block larger than ARIN
       can satisfy from its existing free pool, or, by obtaining
       additional space from IANA, ARIN shall begin offering monetary
       incentives for returned IP blocks according to this policy.

4.10.2 Recovery of IPv4 Space

       ARIN still believes that organizations should voluntarily
       return unused and/or unneeded IP resources to the community.
       However, upon implementation of this policy, ARIN will offer
       monetary incentives for the return of IPv4 resources to ARIN.

4.10.2 Distribution of Recovered Space

       Once approved for IPv4 space ARIN will ask the requester to
       specify an amount they are willing to pay for a block or the
       specified size.

       ARIN will use this bid in determining what incentives  ARIN
       may offer for return of space. If ARIN recovers space and
       offers it to requester at or below the specified price, the
       bid shall be binding on requester.

       If space becomes available from ARIN at a higher cost, ARIN
       shall still offer the space to the requester(s) in the order
       of approval of the requests, but, requester shall have the
       right to refuse any offer at a price higher than bid.

       ARIN shall match bidders first on best prefix length, but,
       in no case shall ARIN provide a partial-fill offer.

4.10.3 Transparency

       ARIN staff shall make public the current and historical
       prices of asks, bids, and executed transactions.  ARIN staff
       must regularly report on the amount of address space obtained
       and distributed via this mechanism.

4.10.4 Cost Recovery

       It is anticipated that ARIN may need to provide some seed
       money to obtain space before it can be given out.  The money
       raised through successful bids will fund the purchase of
       additional blocks to supply any ongoing demand.  While there
       may be a surplus of money or of IPv4 resources at any one
       time, asking prices should be managed in such a way as to
       be revenue neutral to ARIN.

Rationale:

Many have recognized that in order for unused or poorly used IPv4
resources to be returned to the free pool that monetary compensation
will be required.  This is particularly the case in poorly used
assets where the current holder may have to expend time and money
to renumber in order to free the blocks.

This proposal sets up a fund administered by ARIN to encourage the
return of space.  Effectively ARIN will offer monetary incentives to
return unused or poorly used IPv4 resources and place them back into the
IPv4 free pool.

The intention is for this activity to be revenue neutral to ARIN.  To
achieve that goal those requesting IPv4 resources will be requested to
bid on a one-time payment to the recovery fund to cover the cost of the
resources they have received.

The proposal is intentionally vague on the exact implementation details
to staff because:

  - Transactions with those returning space and obtaining space may
    occur in any order.
  - The bidding process may need to evolve over time, and may not
    be as simple as highest bidder wins.  It may include aspects such
    as a dutch auction style format (all winners pay the lowest winning
    price), or may include other factors such as which size blocks
    ARIN has free in an effort to limit deaggregation.
  - ARIN will have to develop contracts and procedures around this
    activity that are better suited for staff and legal than the
    policy process.

Compared to other "transfer proposals", this proposal has the following
benefits:

  - Maintains that IP addresses are not property.
  - Maintains the concept that unused addresses should be returned to
    the free pool.
  - Maintains need based addressing.
  - Removes the need for those with excess resources to find those
    without resources.  There is no need for any sort of listing
    service, eBay, etc.
  - All transactions are two party transactions with ARIN as one of
    the parties.  The potential for multi-party legal disputes is
    reduced.
  - ARIN can absorb spikes in supply or demand, creating more level
    prices over time.
  - ARIN can provide transparency across all transactions in this
    system.
  - Reduces confusion to new entrants over where they should go to
    receive address space.

To illustrate the intent of section 4.10.2, let's say that ARIN has
the following requests in the following order:

1.      a /22 for XYZ Corp. ($300)
2.      a /15 for BIll's Bait and Hosting Megacorp. ($2500)
3.      a /19 for John's Host Hideaway ($2000)
4.      a /21 for Piner Klerpin's New Net ($800)

Example 1:
ARIN receives a /18 from someone, but, pays an incentive of
$2200 for that /18.

ARIN would offer a /19 to John's Host Hideaway for $1100
ARIN would then satisfy Piner Klerpin's request for $225
ARIN would then satisfy XYZ Corp's request for $112.50
ARIN would still have a /20, /21, and /22 for future requests.


Example 2:
ARIN receives a /19 from someone, but, pays an incentive of $2500
ARIN would offer the /19 to John's Host Hideaway for $2500.
If John's turned down the $2500 price, they would remain in
the queue, but, ARIN would subsequently satisfy request 4
at 625 and offer a /21 to requester 4 for 312.50.

Finally an example of what happens with several requests
for the same size:

1.      a /20 for DEF Corp. ($1800)
2.      a /20 for Frank's Swizzler ($1500)
3.      a /20 for Jim's Compushop ($2100)

ARIN manages to obtain a /19 from someone, but, pays $4200
for it.

ARIN would first offer a /20 to DEF for $2100.
ARIN would also offer a /20 to Frank's for $2100.
If either of them refused, Jim's would receive their /20 for $2100.

Timetable for implementation:

Staff should begin developing procedures and updated templates
immediately.  Policy would not go into effect until the criteria
listed occurs.