Funny Money: 1+1=$50M??

[Jim Fleming]

On Sunday, March 30, 1997 11:14 PM, David R. Conrad[SMTP:davidc at apnic.net] wrote:
@ [ONCE AGAIN, removed NSF folk from cc's.  WHY DO YOU HAVE TO BE SO ANNOYING?] 
@ 
@ >Maybe the U.S. Government and the NSF/InterNIC you should hold
@ >an auction for ONE /8 and see how much it raises.
@ 
@ Great idea!  But since I figure I have as much right to auction
@ integers as anyone else, I hereby put some numbers (oh say, the range
@ denoted by 223/8) up for auction.  What do I hear?  Heck, I'll even
@ throw in a signed certificate for the proud buyer (just like Jim
@ claims he did for the integers he sold at $50 a pop (or something like
@ that)).  
@ 
@ Hmmm.  You don't suppose Jim could have ulterior motives here? 
@ 

When did you purchase 223.x.x.x/8 ?

@ >You apparently think it will bring $5 million.
@ >I claim that $50 million is more likely.
@ 
@ You know this.  From reports of transactions on the black market, the
@ prices for a /8 would appear to range somewhere between $4,096,000 and
@ $16,384,000 (assuming linear extrapolation from purported sales of
@ /16s).
@ 

You have to be careful with this extrapolation.
You are using black market figures in a climate where
"some" companies get allocations for FREE.

The black market value of a /16 is mostly based on
what companies estimate they will have to pay
consultants to interface with the InterNIC to obtain
an allocation. $50,000 for a /16 seems to be common.

If (or rather when) all companies pay for their IP space,
then your numbers could easily go up by a factor of 4.
That would place a /8 in the range of $16 to $50 million.

@ >Are the costs of renumbering taken into account when
@ >	valuing IP blocks ?
@ 
@ You know this.  Presumably those organizations which have purchased
@ addresses on the black market did so.
@ 

The cost of dealing with the InterNIC is also considered.

@ >	Who is going to be responsible for those costs ?
@ 
@ You know this.  Presumably those people who incur them.
@ 
@ >	Will ARIN be addressing those costs ?
@ 
@ You know this.  No.  ARIN provides allocation services to those paying
@ its fees.
@ 

So, you do not see ARIN as being responsible if
the ARIN organization costs one company substantially
more money than another. Does ARIN intend to carefully
document each request and the outcome ?

@ >What do corporations value their /8s at on their books ?
@ 
@ I suspect you'd need to ask those corporations.
@ 
@ >	Why do large companies get to avoid renumbering costs ?
@ 
@ You know this.  They may or may not avoid renumbering costs -- it
@ depends on the provider they use.
@ 

What about the large companies that have their own /8s ?
Why are they also using space from other parts of the IPv4 space ?
Why does the InterNIC allocate /16s to companies that have /8s ?
Why do some companies have more than one /8 ?

@ >	What advantage does that give large companies over small
@ >	companies and what is the value of those advantages ?
@ 
@ Presumably, you are also upset when you can't get a loan from a bank
@ at the same rate as multi-billion dollar companies. 
@ 
@ >	Will ARIN be addressing these issues ?
@ 
@ You know this.  No.
@ 
@ >Why are small ISPs forced to be tied to upstream providers ?
@ 
@ You know this.  It is called hierarchical addressing.
@ 

(see PI space below)

@ >	Who is going to be responsible for those policies ?
@ 
@ You know this.  Internet service providers.
@ 
@ >	What happens when small ISPs are put out of business
@ >		by large upstream providers who raise rates after
@ >		binding the ISP to their service by locking them
@ >		out of the IP allocation opportunities?
@ 
@ You know this.  If the small ISPs "are put out of business" then
@ presumably the employees will look for new jobs.  However, there is no
@ evidence that ARIN will result in small ISPs will be "locked out of IP
@ allocation opportunities" any more than they are now.
@ 

So ARIN will not improve the current situation
despite the fact that ISPs are supposed to now
pay for the same unfair treatment.

@ >	Will ARIN be addressing these issues ?
@ 
@ You know this.  No.
@ 
@ >To summarize:
@ >	1. Renumbering costs are significant to ISPs and
@ >		should be considered when valuing IP adddresses.
@ 
@ Obvious.
@ 
@ >	2. Large, legacy corporation advantages over small ISPs are
@ >		real and need to be addressed by the government.
@ 
@ By the government?  I don't think you want the Japanese government to
@ get involved in this, they're not very popular according to recent
@ poles.  Oh, did you mean some other government?  Canada perhaps?
@ Mexico?
@ 

The U.S. Government is a good start, see the limited CC list above.

@ >	3. Upstream provider allocations to ISPs are a severe
@ >		handicap and need to be reduced via PI allocations.
@ 
@ Just curious (not that I expect an answer): how do you propose to
@ route all those PI allocations?
@ 

As I have answered this before....

	1. The 3,000 ISPs in the U.S. should be given /18s
		with the agreement that they advertise it
		as a single aggregate and that they have
		two providers that agree in advance to handle
		the advertised route.
	2. The routing tables can easily handle that addition
		and this will result in many routes being
		removed.
	3. I suggested a short-form application that ISPs can
		use to apply for this space and in my
		opinion they should take that application
		directly to the National Science Foundation
		and if necessary, their U.S. Senator. I will
		be happy to post a list of contacts if needed.

--
Jim Fleming
Unir Corporation
http://www.Unir.Corp

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