Still blah, blah, blah

[Larry Honig]

Jim Fleming wrote:
> 
> The market value of a single /8 is easily about...
> 
>         $50 million
>         or
>         one Stealth Jet Fighter
> 
> If you assume that the 24 bit address space
> has over 16.7 million raw addresses and a
> lease rate of $2 per address per year with
> a 50% occupancy level then the revenue
> from one /8 can be about $16 million/year.
> 
> If a /8 requires $1 million in staff and support
> per year, then the net profit can be about
> $15 million per year. With a 5 times multiple
> this places the value at about $75 million.
> A more conservative value could be $50 million.
> 

Jim, this is the internal conflict I see in your proposals writ large.
You may assume that the "lease rate" is $2/year (there is no market
research to support this, but lets just go with it). If your cost
figures are correct, then the investment community will simply *rush* to
invest in this new "industry" which offers a *15 times* yield (your
figures, $1m in and $15m out), and the lease rates will come down
rapidly to allow a more normal rate of return, generally about 20% on
invested capital on a going business which is largely, to use your own
words, based on 

> Three words come to mind
>        ...marketing, marketing, and marketing...

In my experience, business people wha have been around for a while have
a word for companies who base their enterprises on assumptions like
these: 

Toast.

Eventually, and sooner rather than later, this tulip craze will result
in an "industry" which, if there is no significant added value, throws
off a minimal amount of true returns. It seems to me to be more logical
to allow it to enter this relatively low-profit "steady state" from the
beginning, which seems to me to be consistent with the stated reasons
for ARIN. Of course, I could be wrong, 1500% returns could simply
continue, unchallenged forever, and pigs could sprout wings and fly.


I don't recall Colgate or P&G or NBC or any other non-monopoly earning
consistent rates of return much above, okay, lets be generous, 30%.
Unless you intend to repeal the generally accepted economic principles
of the free market, the registry "business" will. if open to all comers,
be no more attractive than any other business. Simply tossing lots of
unrelated words into a pot, like 

>        Domain Name Registrations
>        IP Address Leasing
>        Digital Certificates
>        Digitial Wallets
>        Micro-royalties for Software Developers
>        Micro-payments for Software Usage

doesn't make them become soup. These items may have some common
requirements (the ability of the consumer to evaluate the reliability of
the issuing registries, for one) but they do not seem to me to be the
same business. Come clear - are you suggesting that ARIN take the /8
that you are offering to let them "have" and use it to build a
monopolistic world where ARIN also offers the other services you seem to
see as related? Or are you revealing, rather, what you intend to do? 

It seems to me that your position would be more consistent (not wiser,
but certainly more consistent) if you advocated a government-sponsored
auction of the numbers making up IPv4 space, along the lines of the
radio-spectrum auctions recently held. (However this seems to me to be
completely ridiculous - a spectacle only an Ira Magaziner could think
up.) Other than the deprivation of the millions you may be planning on
making in your new $2 /year registry business, exactly how does the
concept behind ARIN harm you?

/Larry

maybe "/0" is too modest - could I become "/-2.5" ?