Draft Policy ARIN-2014-20: Transfer Policy Slow Start and Simplified Needs Verification - revised

[ARIN]

Below is a staff and legal assessment for ARIN-2014-20: Transfer Policy 
Slow Start and Simplified Needs Verification.

The draft policy text is below and available at:
https://www.arin.net/policy/proposals/2014_20.html

Regards,

Communications and Member Services
American Registry for Internet Numbers (ARIN)


##*##


ARIN STAFF ASSESSMENT
Policy Proposal: 2014-20 “Transfer Policy Slow Start and Simplified 
Needs Verification”
Date of Assessment:  22 Sept 2014

1. Summary (Staff Understanding)

This policy makes significant changes to 8.3 and 8.4 transfers that will 
affect both new and existing end-users and ISPs.

1.    New end users – currently can request up to a 24-month supply of 
IPv4 address space via an 8.3 or 8.4 transfer. This policy will allow 
new end users to receive a /24 maximum assignment via an 8.3 or 8.4 
transfer without a needs-based assessment of projected future usage.
2.    New ISPs – currently can request up to a 24-month supply of IPv4 
address space via an 8.3 or 8.4 transfer.  This policy will allow new 
ISPs to transfer up to a /21 maximum allocation via an 8.3 or 8.4 
transfer without a needs-based assessment of projected future usage.
3.    Existing end users and ISPs – currently can request up to a 
24-month supply of IPv4 address space via an 8.3 or 8.4 transfer.  Under 
this policy, an existing end user or ISP with 80% overall utilization 
can receive via transfer as much space as they currently hold in total 
without any need assessment, OR a 24-month supply based on their monthly 
utilization rate.


2. Comments

A.    ARIN Staff Comments

·      This policy will significantly reduce the total amount of IPv4 
address space that new end users or ISPs can obtain via an 8.3 or 8.4 
transfer due to the removal of forward-looking needs-justification that 
is replaced with justification based on current need  with a set maximum 
size limit.
·      This policy will significantly increase the total amount of IPv4 
address space that existing end users or ISPs can obtain via an 8.3 or 
8.4 transfer.
·      This policy creates more options for approval of transfers, which 
may make it more difficult for the community to fully understand.
·      Based on staff’s reading of the problem statement, it appears 
that there may be some misconceptions about some of the current 8.3 
evaluation processes.  Here are some clarifications:
o   The assessment of the 24-month need is based on both projected 
growth and demonstrated utilization
o   Slow start is not used to assess 8.3 transfers
o   A current mechanism exists (pre-approval) for an organization to 
receive pre-approval of their 24-month need.  They can then conduct 
multiple 8.3 transfers during that 24-month period in order to fulfill 
the pre-approved amount without having to re-justify their need each time.


·      This policy could be implemented as written.


B.    ARIN General Counsel - Legal Assessment

I examined the proposed amendments to Policies 2014-14 and 2014-20 
together, because both are ostensibly intended to solve the same 
problem: difficulties experienced by new entrants and smaller entities 
that may be unable to obtain addresses they need due to current policy 
limits at time when ISP IPV4 issuance to such downstream entities may be 
limited. Counsel believes that 2014-14 presents significantly less legal 
concern than 2014-20. Policy 2014-14 creates greater efficiency by 
removing a showing of need, and allowing a transfer of a /16 or smaller 
bloc. Exceptions to needs based review can be justified because the 
smaller size of the blocs does not provide a significant vehicle to 
‘game’, ‘hoard’, or ‘speculate’ sizable IP resource blocks of size. The 
exception would address approximately 85% of 8.3 transfers, and thus be 
efficient for administration.

Policy proposal 2014-20 as described would permit new end users to 
obtain a /24 maximum assignment and new ISPs to obtain a new /21 maximum 
assignment without needs-based assessments.  These proposed exceptions 
to needs based review, like similar but different provisions in 2014-14, 
  do not provide a significant vehicle to ‘game’, ‘hoard’, or 
‘speculate’ for IP resource blocks of significant size. Those aspect of 
2014-20 raise no meaningful legal issue.  However, the 2014-20 proposal 
does cause some legal concern in its treatment of large volume resource 
holders. It would permit an existing end user or ISP to “receive via 
transfer as much space as they currently hold in total without any need 
assessment, OR a 24-month supply based on their monthly utilization 
rate.”  This exemption from the needs-based assessment provides a very 
significant exemption that benefits the largest resource holders the 
most, when that is not the articulated problem to be solved.  Although 
both proposals are intended to solve a problem of access for new 
entrants and small entities, this aspect of the proposed language in 
policy 2014-20 has the unfortunate side effect of increasing inequality, 
as the largest resource holders in the ARIN region currently hold the 
majority of all number resources, and exempting them from the needs 
requirement up to the amount they already hold permits such entities the 
right to obtain large quantities of additional resources without any 
evaluation of needs.
(Rather than creating such a broad exemption that essentially reduces 
the needs-based requirement to a shadow, it would be more rational to 
remove the needs requirement altogether, if the community believes that 
is the appropriate case than approving this broad exemption proposal. 
Counsel takes no position on the need to either retain or repeal the 
needs based requirement, as this issue is not before us in this policy).


3. Resource Impact

This policy would have minimal resource impact from an implementation 
aspect.  It is estimated that implementation would occur within 3 months 
after ratification by the ARIN Board of Trustees. The following would be 
needed in order to implement:
·      Updated guidelines and internal procedures
·      Staff training

  4. Proposal/Draft Policy Text Assessed
Draft Policy ARIN-2014-20
Transfer Policy Slow Start and Simplified Needs Verification
Date: 19 September 2014

Problem Statement:
As IPv4 depletion occurs, it will become difficult for organization to 
get IP addresses. This will impact an organization as follows:
1. New organizations will have difficulty qualifying for the initial 
slow start as it may become difficult to get IP space from an upstream 
provider
2. New organizations that are growing rapidly will have difficulty 
growing by doubling under slow start, because it will require a 
succession of many transfers, and hence many commercial agreements (each 
with its own financial overhead), and finding the right succession of 
ever increasing block sizes.
3. Existing organizations with regular growth may have difficulty 
getting the right sized block to transfer, and may require multiple 
transfers to meet their needs, making justification and deployment 
challenging.
4. Existing organization with an unprecedented growth rate have a 
similar challenge to new organizations with rapid growth where they will 
need to double, and therefore require a succession of many transfers, 
and hence many commercial agreements (each with its own financial 
overhead), and finding the right succession of ever increasing block sizes.

Policy statement:
Replace the following section 8.3 text:
“The recipient must demonstrate the need for up to a 24-month supply of 
IP address resources under current ARIN policies and sign an RSA.”
with
"Recipients will be subject to current ARIN policies and sign an RSA for 
the resources being received"
Remove the following section 8.4 text:
“Recipients within the ARIN region must demonstrate the need for up to a 
24-month supply of IPv4 address space.”
Add:
8.3.1 New ORGs
8.3.1.1 End-Sites
End-user organizations which do not currently hold IP addresses, and can 
demonstrate 50% immediate utilization by currently held equipment, will 
immediately qualify for a non-M&A transfer between the minimum 
assignment size and a /24, inclusive.
8.3.1.2 ISPs
ISP organizations which do not currently hold IP addresses, and can 
demonstrate 50% immediate utilization by currently held equipment, 
current customers, or customer orders will immediately qualify for a 
non-M&A transfer between the minimum allocation size and a /21, inclusive.
8.3.2 Existing ORGs
8.3.2.1 Minimum requirements
Prior to qualifying for non-M&A address transfers, an organization must 
demonstrate an average of 80% utilization, as measured under section 4, 
across the aggregate of all addresses that are currently allocated, 
assigned, reallocated, or reassigned to, or otherwise in use by, the 
organization.
8.3.2.2 Transfer Approval
An organization which qualifies for transfers under one of the criteria 
in 8.3.2.3 shall be approved for the transfer in of an aggregate amount 
of address space as determined by the relevant section. An organization 
with such an approval may then complete one or more transfers, with a 
cumulative total not exceeding the approved amount, without submitting 
additional justification. An organization will be ineligible for 
additional non-M&A transfers until it can again demonstrate that it 
meets the minimum requirements in section 8.3.2.1.
8.3.2.3 Qualifying Criteria
8.3.2.3.1 Stable Growth
Organizations may be approved for the non-M&A transfer of additional 
address  space equal to the amount of address space they were holding at 
the time of approval.
8.3.2.3.2 Rapid Growth
Organizations may be approved for the non-M&A transfer of additional 
address  space equal to 24 times the organization’s calculated monthly 
average use rate.
8.3.2.3.2.1 Calculation of Monthly Average Use Rate
An organization may choose a look-back window of any number of months 
between 3 and 12, inclusive, from the date of the current request. ARIN 
will calculate the total amount of new addresses acquired, during the 
look-back window, by the organization from non-M&A transfers, direct 
allocations or assignments from ARIN, or reallocations or reassignments 
from an ISP. That total will be divided by the number of months in the 
look-back window to calculate the organization’s monthly average use rate.
8.3.2.3.2.2 Returned IP space
If addresses are returned or transferred out within the look-back 
window, then those addresses will be subtracted from the total amount of 
new addresses acquired for the purposes of the monthly average use rate 
calculation.
8.3.2.3.2.3 M&A activity
If M&A transfer activity occurs during the look-back window, the 
addresses acquired through M&A transfers will only be counted in the 
total amount of new addresses acquired if the pre-M&A organization had 
acquired the resources during the post-M&A organization’s look-back window.
8.4.1 -- Same text as 8.3.1
Timetable for implementation: Immediate


On 9/19/14, 4:03 PM, ARIN wrote:
> Draft Policy ARIN-2014-20
> Transfer Policy Slow Start and Simplified Needs Verification
>
> ARIN-2014-20 has been revised.
>
> Draft Policy ARIN-2014-20 is below and can be found at:
> https://www.arin.net/policy/proposals/2014_20.html
>
> Regards,
>
> Communications and Member Services
> American Registry for Internet Numbers (ARIN)
>
>
> ## * ##
>
>
> Draft Policy ARIN-2014-20
> Transfer Policy Slow Start and Simplified Needs Verification
>
> Date: 19 September 2014
>
> Problem Statement:
> As IPv4 depletion occurs, it will become difficult for organization to
> get IP addresses. This will impact an organization as follows:
>
> 1. New organizations will have difficulty qualifying for the initial
> slow start as it may become difficult to get IP space from an upstream
> provider
>
> 2. New organizations that are growing rapidly will have difficulty
> growing by doubling under slow start, because it will require a
> succession of many transfers, and hence many commercial agreements (each
> with its own financialoverhead), and finding the right succession of
> ever increasing block sizes.
>
> 3. Existing organizations with regular growth may have difficulty
> getting the right sized block to transfer, and may require multiple
> transfers to meet their needs, making justification and deployment
> challenging.
>
> 4. Existing organization with an unprecedented growth rate have a
> similar challenge to new organizations with rapid growth where they will
> need to double, and therefore require a succession of many transfers,
> and hence many commercial agreements (each with its own
> financialoverhead), and finding the right succession of ever increasing
> block sizes.
>
> Policy statement:
>
> Replace the following section 8.3 text:
>
> “The recipient must demonstrate the need for up to a 24-month supply of
> IP address resources under current ARIN policies and sign an RSA.”
>
> with
>
> "Recipients will be subject to current ARIN policies and sign an RSA for
> the resources being received"
>
> Remove the following section 8.4 text:
>
> “Recipients within the ARIN region must demonstrate the need for up to a
> 24-month supply of IPv4 address space.”
>
> Add:
>
> 8.3.1 New ORGs
>
> 8.3.1.1 End-Sites
>
> End-user organizations which do not currently hold IP addresses, and can
> demonstrate 50% immediate utilization by currently held equipment, will
> immediately qualify for a non-M&A transfer between the minimum
> assignment size and a /24, inclusive.
>
> 8.3.1.2 ISPs
>
> ISP organizations which do not currently hold IP addresses, and can
> demonstrate 50% immediate utilization by currently held equipment,
> current customers, or customer orders will immediately qualify for a
> non-M&A transfer between the minimum allocation size and a /21, inclusive.
>
> 8.3.2 Existing ORGs
>
> 8.3.2.1 Minimum requirements
>
> Prior to qualifying for non-M&A address transfers, an organization must
> demonstrate an average of 80% utilization, as measured under section 4,
> across the aggregate of all addresses that are currently allocated,
> assigned, reallocated, or reassigned to, or otherwise in use by, the
> organization.
>
> 8.3.2.2 Transfer Approval
>
> An organization which qualifies for transfers under one of the criteria
> in 8.3.2.3 shall be approved for the transfer in of an aggregate amount
> of address space as determined by the relevent section. An organization
> with such an approval may then complete one or more transfers, with a
> cumulative total not exceeding the approved amount, without submitting
> additional justification. An organization will be ineligible for
> additional non-M&A transfers until it can again demonstrate that it
> meets the minimum requirements in section 8.3.2.1.
>
> 8.3.2.3 Qualifying Criteria
>
> 8.3.2.3.1 Stable Growth
>
> Organizations may be approved for the non-M&A transfer of additional
> address space equal to the amount of address space they were holding at
> the time of approval.
>
> 8.3.2.3.2 Rapid Growth
>
> Organizations may be approved for the non-M&A transfer of additional
> address space equal to 24 times the organization’s calculated monthly
> average use rate.
>
> 8.3.2.3.2.1 Calculation of Monthly Average Use Rate
>
> An organization may choose a look-back window of any number of months
> between 3 and 12, inclusive, from the date of the current request. ARIN
> will calculate the total amount of new addresses acquired, during the
> look-back window, by the organization from non-M&A transfers, direct
> allocations or assignments from ARIN, or reallocations or reassignments
> from an ISP. That total will be divided by the number of months in the
> look-back window to calculate the organization’s monthly average use rate.
>
> 8.3.2.3.2.2 Returned IP space
>
> If addresses are returned or transferred out within the look-back
> window, then those addresses will be subtracted from the total amount of
> new addresses acquired for the purposes of the monthly average use rate
> calculation.
>
> 8.3.2.3.2.3 M&A activity
>
> If M&A transfer activity occurs during the look-back window, the
> addresses acquired through M&A transfers will only be counted in the
> total amount of new addresses acquired if the pre-M&A organization had
> acquired the resources during the post-M&A organization’s look-back window.
>
> 8.4.1 -- Same text as 8.3.1
>
> Timetable for implementation: Immediate
>
>
>
>
> On 9/3/14, 4:55 PM, ARIN wrote:
>> On 28 August 2014 the ARIN Advisory Council (AC) accepted "ARIN-prop-212
>> Transfer policy slow start and simplified needs verification" as a Draft
>> Policy.
>>
>> Draft Policy ARIN-2014-20 is below and can be found at:
>> https://www.arin.net/policy/proposals/2014_20.html
>>
>> You are encouraged to discuss the merits and your concerns of Draft
>> Policy 2014-20 on the Public Policy Mailing List.
>>
>> The AC will evaluate the discussion in order to assess the conformance
>> of this draft policy with ARIN's Principles of Internet Number Resource
>> Policy as stated in the PDP. Specifically, these principles are:
>>
>>    * Enabling Fair and Impartial Number Resource Administration
>>    * Technically Sound
>>    * Supported by the Community
>>
>> The ARIN Policy Development Process (PDP) can be found at:
>> https://www.arin.net/policy/pdp.html
>>
>> Draft Policies and Proposals under discussion can be found at:
>> https://www.arin.net/policy/proposals/index.html
>>
>> Regards,
>>
>> Communications and Member Services
>> American Registry for Internet Numbers (ARIN)
>>
>>
>> ## * ##
>>
>>
>> Draft Policy ARIN-2014-20
>> Transfer Policy Slow Start and Simplified Needs Verification
>>
>> Date: 3 September 2014
>>
>> Problem Statement:
>> As IPv4 depletion occurs, it will become difficult for organization to
>> get IP addresses. This will impact an organization as follows:
>>
>> 1. New organizations will have difficulty qualifying for the initial
>> slow start as it may become difficult to get IP space from an upstream
>> provider
>>
>> 2. New organizations that are growing rapidly will have difficulty
>> growing by doubling under slow start, because it will require a
>> succession of  many transfers, and hence many commercial agreements
>> (each with its own financialoverhead), and finding the right succession
>> of ever increasing block sizes.
>>
>> 3. Existing organizations with regular growth may have difficulty
>> getting the right sized block to transfer, and may require multiple
>> transfers to meet their needs, making justification and deployment
>> challenging.
>>
>> 4. Existing organization with an unprecedented growth rate have a
>> similar challenge to new organizations with rapid growth where they will
>> need to double, and therefore require a succession of  many transfers,
>> and hence many commercial agreements (each with its own
>> financialoverhead), and finding the right succession of ever increasing
>> block sizes.
>>
>> Background on current policy
>> --------------------------------------
>> For ISPs to get an initial allocation from ARIN, they must demonstrate
>> efficient utilization of a /20 (or between a /23 to a /21 for
>> multi-homed) from their upstream ISP.  ISPs may also qualify under the
>> exceptional process of immediate need.  Once an ISP gets its first ARIN
>> allocation it can repeatedly double under slow start assuming the usage
>> of IP space is growing and all of the available IPs are efficiently
>> utilized in less that 1.5 months.
>>
>> Subsequent allocations are based on the past one year utilization rate
>> and demonstration of efficient utilization of all previously held space,
>> as well as 80% utilization of the most recent block.  ARIN will provide
>> addresses up to a 3 month supply based on the previous one year run
>> rate. Transfers up to a two year supply based on the previous one year
>> run rate are also permitted.
>>
>> End users can qualify for an initial assignment based on their
>> anticipated one year projection so long as they can put 25% of the
>> addresses in use immediately (30 days) and have over 50% utilization
>> within one year.
>>
>> Subsequent assignments must first demonstrate 80% utilization of all
>> previous assignments, and then are again based on their anticipated one
>> year projection so long as they can put 25% of the addresses in use
>> immediately (30 days) and have over 50% utilization within one year.
>>
>> Issue with current policy when IPv4 is depleted
>> -------------------------------------------------------------
>>
>> IPv4 depletion may make if difficult for ISPs to be able to get an
>> allocation from an upstream provider creating a barrier to entry.
>>
>> Additionally, slow start for an ISP would require frequent and small
>> IPv4 transfers.  This is costly in that it leads to address
>> fragmentation, and requires multiple transfer agreements to be
>> negotiated and signed.
>>
>> For end users, the easiest way to demonstrate immediate need is to
>> already be using IP space from an up stream provider, and promise to
>> renumber into the newly provided IP space (although this may actually
>> take more than 30 days to execute).  This approach may be limited if an
>> end user has difficulty getting an assignment from an upstream ISP.
>>
>> Additionally, the 25% immediate (30 day) need and 50% one year
>> utilization rates are completely future looking projections.  It may be
>> difficult to verify these claims prior to transferring the address
>> space, and a required return of the address at the 30 day or one year
>> make may make the financial transaction complicated. The 30 day
>> utilization provision is problematic for larger end sites who may have
>> hosts that can use the addresses immediately, but require more that 30
>> days to fully deploy the addresses.
>>
>> Policy statement:
>>
>> Remove the following section 8.3 text:
>>
>> “The recipient must demonstrate the need for up to a 24-month supply of
>> IP address resources under current ARIN policies and sign an RSA.”
>>
>> Remove the following section 8.4 text:
>>
>> “Recipients within the ARIN region must demonstrate the need for up to a
>> 24-month supply of IPv4 address space.”
>>
>> Add:
>>
>> 8.3.1 New ORGs
>>
>> 8.3.1.1 End-Sites
>> End-user organizations which do not currently hold IP addresses, and can
>> demonstrate 50% immediate utilization by currently held equipment, will
>> immediately qualify for a non-M&A transfer between the minimum
>> assignment size and a /24, inclusive.
>>
>> 8.3.1.2 ISPs
>> ISP organizations which do not currently hold IP addresses, and can
>> demonstrate 50% immediate utilization by currently held equipment,
>> current customers, or customer orders will immediately qualify for a
>> non-M&A transfer between the minimum allocation size and a /21,
>> inclusive.
>>
>> 8.3.2 Existing ORGs
>>
>> 8.3.2.1 Minimum requirements
>> Prior to qualifying for non-M&A address transfers, an organization must
>> demonstrate an average of 80% utilization, as measured under section 4,
>> across the aggregate of all addresses that are currently allocated,
>> assigned, reallocated, or reassigned to, or otherwise in use by, the
>> organization.
>>
>> 8.3.2.2 Transfer Approval
>> An organization which qualifies for transfers under one of the criteria
>> in 8.3.2.3 shall be approved for the transfer in of an aggregate amount
>> of address space as determined by the relevent section. An organization
>> with such an approval may then complete one or more transfers, with a
>> cumulative total not exceeding the approved amount, without submitting
>> additional justification. An organization will be ineligible for
>> additional non-M&A transfers until it can again demonstrate that it
>> meets the minimum requirements in section 8.3.2.1.
>>
>> 8.3.2.3 Qualifying Criteria
>>
>> 8.3.2.3.1 Stable Growth
>> Organizations may be approved for the non-M&A transfer of additional
>> address space equal to the amount of address space they were holding at
>> the time of approval.
>>
>> 8.3.2.3.2 Rapid Growth
>> Organizations may be approved for the non-M&A transfer of additional
>> address space equal to 24 times the organization’s calculated monthly
>> average use rate.
>>
>> 8.3.2.3.2.1 Calculation of Monthly Average Use Rate
>> An organization may choose a look-back window of any number of months
>> between 3 and 12, inclusive, from the date of the current request.  ARIN
>> will calculate the total amount of new addresses acquired, during the
>> look-back window, by the organization from non-M&A transfers, direct
>> allocations or assignments from ARIN, or reallocations or reassignments
>> from an ISP.  That total will be divided by the number of months in the
>> look-back window to calculate the organization’s monthly average use
>> rate.
>>
>> 8.3.2.3.2.2 Returned IP space
>> If addresses are returned or transferred out within the look-back
>> window, then those addresses will be subtracted from the total amount of
>> new addresses acquired for the purposes of the monthly average use rate
>> calculation.
>>
>> 8.3.2.3.2.3 M&A activity
>> If M&A transfer activity occurs during the look-back window, the
>> addresses acquired through M&A transfers will only be counted in the
>> total amount of new addresses acquired if the pre-M&A organization had
>> acquired the resources during the post-M&A organization’s look-back
>> window.
>>
>> 8.4.1 -- Same text as 8.3.1
>>
>> Timetable for implementation: Immediate
>