A whole /8 for sale

The emerging market for IPv4 addresses is about to cross a new threshold. A letter with the following words has been circulating among businesses for the past month:

Our client is offering for sale 16,777,216 IPv4 numbers in a single, contiguous, number block commonly referred to as either a “Class A” number block or a “/8”. This “legacy” IPv4 block is not subject to any Regional Internet Registry (RIR) agreement. The seller’s exclusive rights and interest in the number block has been fully researched, documented and independently certified. The Buyer will acquire all the attendant rights of use, transferability and exclusivity. The sale and transfer of the number block is not subject to any RIR transfer policies. Due to the unique attributes of this number block, such as its Certification, its size, and the applicable global routing policies, to name just a few, this asset is both highly desirable and extremely valuable. There are no costs, no risks, and no hidden obligations to exploring this opportunity further.

The letter comes from Addrex, the IP address brokerage that facilitated the Nortel – Microsoft exchange of IPv4 addresses. According to Addrex, more than two dozen companies have sent in expressions of interest. The deadline for submitting expressions of interest is February 17.

We cover this because Addrex is openly marketing the address block as outside of the RIR system. This makes it an interesting tipping point in the governance of IP addresses. Whoever is selling the blocks – and we do not know which organization it is and Addrex does not wish to disclose it – has nothing to lose and everything to gain from fully leveraging the block’s legacy status. The buyer of the addresses likewise would benefit from the block’s legacy status, as it could be obtained without reference to ARIN’s obsolete “needs assessment” policies. But because such a trade would erode ARIN’s control over the IPv4 address space, it might try to threaten negative repercussions on buyers. As far as we can tell, ARIN has no legal grounds on which to stop such a trade, but as we noted in an earlier article they like to drop hints that such numbers might be “disputed or unreliable” in order to scare sellers off. This makes for an interesting showdown. No doubt the trading price of the block will reflect the degree of uncertainty, another reason to keep your eye on this impending trade.

10 comments

  1. John Curran

    Milton –

    I was surprised that your article did not mention the more interesting Internet governance aspects of the situation.

    As you are aware, the Regional Internet Registries (RIRs) manage Internet number resources based on policies developed in each region. These policies are developed by the community in each region using open and transparent processes. The participants in the policy development efforts are predominantly service providers, but individual end-users, governments, educational, and civil society organizations are also common participants.

    In short, the Regional Internet number registry system works well, and is recognized by ICANN as a successful mechanism for the overall technical coordination of Internet number resources.

    The policies of the Internet number registry system change to reflect the requirements of the community, and this includes adoption in many regions of policies which support limited market-based mechanisms for encouraging more efficient address utilization. These policies balance a number of additional considerations, including both communities need to reduce routing table impact from address deaggregation as well as encouragement of IPv6 as the long-term solution to IPv4 runout.

    Your article implies that ARIN's policies “obsolete”, but I will note these policies have been frequently updated by the community to provide for reasonable address availability while still managing the technical aspects of keeping the Internet running.

    ARIN operates the registry according to the community developed policy, and this includes all IP address blocks in the region including “legacy blocks.” We follow these policies when approving transfers of address space because it respects the bottom-up policy development that has occurred and that is the hallmark of good Internet governance.

    Are you suggesting the ARIN disregard the policies set by the community when processing requests for transfers? How does that reconcile with fair and open Internet governance? As ARIN was formed “to give the users of IP numbers (mostly Internet service providers, corporations and other large institutions) a voice in the policies by which they are managed and allocated within the North American region”, I am uncertain how we can now ignore those policies, and am curious why you are now advocating that doing so makes for good Internet governance.

    In http://blog.internetgovernance.org/blog/_archives/2010/4/20/4509826.html, you wrote: “To sum up, we've had pretty open, focused and (with the one exception noted) fair discussions here. For those with the technical background to understand the Internet governance implications of RIR decisions and policies, I'd encourage participation and membership in ARIN. ”

    For those who heeded your call and have been participating, do you now believe that their input (and the rest of the community's) should simply be set aside to allow transfers outside of the system for maximum financial gain?

    Clarification on this point would be helpful.

    Thank you,

    /John

    John Curran

    President and CEO

    ARIN

  2. Milton Mueller

    Hello, John

    You ask, “Are you suggesting the ARIN disregard the policies set by the community when processing requests for transfers?” My answer: No.

    I am, however, noting (as an objective fact) that ARIN policies do not apply to entities that have not signed contracts with ARIN. ARIN staff, and many of the people active within it, seem to have trouble accepting that fact.

    I would also note that ARIN has been warned repeatedly by people like me that it should abandon or drastically liberalize needs assessments for transfers because the nature of “need” for addresses (as any economist will tell you) depends on the buyers' time horizons, future prospects and other factors that cannot be “demonstrated” in a needs assessment. What matters is how much the bidder values addresses, not some arbitrary technical assessment. ARIN policies which set a 3 month time horizon for proving need are simply going to drive anyone who can legally avoid it outside of ARIN's transfer system. ARIN is beleaguered by a small number of anti-market ideologues who never wanted to allow transfers to begin with and, failing in their quest to prevent them completely, have chosen to hobble 8.3 transfers as much as possible. Therefore, transfers “outside the system” will in fact take place because they are in the interests of both parties and there is nothing to legally prevent them.

  3. John Curran

    Milton –

    You should work on sharing your views on what makes for appropriate transfer policies within the policy development process; all are welcome to participate.

    Regarding transfers “outside the system”, I will note that ARIN operates the registry for the community according to the policies that they set. There is no obligation for ARIN to update the registry contrary to these policies and doing so would be contrary to our very reason for existence.

    The rights that various parties have to address block registrations is governed by policy set by the community, and we update those registrations accordingly. If someone attempts to transfer the address block in the registry, that requires putting in a request that meets those policies.

    ARIN has never had to make any change to the registry contrary to the community's wishes. These policies fully govern updates to the registry, and transfers of these registrations does not otherwise occur. I imagine that there are many things that folks could claim to sell in this world, but they do not relate to the rights that parties have to address blocks in the registry unless they comply with the community policy for the registry.

    Best wishes,

    /John

    John Curran

    President and CEO

    ARIN

  4. Charles Lee

    Dear Professor Mueller:

    An open marketplace for the legitimate and legal sale of distributed but unused “Legacy” IPv4 number blocks is good for access service providers, content platforms and users, and it as well solves the acute problems of a “hard” landing while the Internet transitions to IPv6. This marketplace should be welcomed by everyone, including ARIN’s Board of Trustees, members of its advisory council and members. This marketplace can, and does, provide an essential service to enable the continued growth of the Internet.

    To that end, we can again confirm that one of Addrex Inc.’s clients is offering for sale a “Class A” or “/8” number block.

    Your article refers to “ARIN’s obsolete ‘needs assessment’ policies,” which is a characterization that Mr. Curran, CEO of ARIN, objects to on the basis of his belief that his members, who have voted for these needs-basis “policies”, are reacting to the overall direction that the “community” deems appropriate. In reality, it is not the “overall” community but the controlling members of ARIN who are dictating policy. This setting of rules for a marketplace, under the guise of “governance”, is simply the buyers colluding to maintain access to low price assets while the sellers, whom we represent, are not members and have zero contractual relationship with ARIN, are financially harmed due to this anti-competitive behavior.

    Addrex’s position is that the marketplace should determine who has the greatest need, instead of ARIN, or any other third party, picking the winners and losers. We refer to your July and November, 2008 articles found in the “newsroom” on our website . Such a marketplace offers a pragmatic solution, global in scale, with legitimate participants, unhampered by the bureaucratic disputes and ever-changing policies of the current five RIRs. (“Policies”, we might add, voted upon by a minority of interested “members” in this completely voluntary association run by and for these members to the exclusion of non-members. The concept of “need” becomes “relative need” rather than some engineering-based calculation of absolute need, to use the Professor’s own words.)

    You, again, unfortunately are correct when you reference ARIN’s veiled threats. One such threat is that ARIN might retaliate, against any of their members who participate in the marketplace, by “reclaiming” other number blocks which were distributed under a separate contract to that member organization by ARIN. This threat effectively seeks to deny the ARIN membership organizations the opportunity to compete in a fair market. The consequence of such a threat is that it manipulates the marketplace, to the detriment of sellers, by chilling potential buyers, and therefore limiting competition, and artificially lowers the price a seller might receive. Another threat is that ARIN might discriminate against marketplace participants by refusing to update the registry to reflect the newly-acquired number block(s). Mr. Curran’s latest retort states that “There is no obligation for ARIN to update the registry…”. This, too, limits competition and artificially lowers the price a seller might receive. Both of these threats are purportedly based on ARIN’s policy positions and/or contract provisions. The entire concept that ARIN and its controlling members can openly conspire in such a manner is rather surprising.

    Your article, we respectfully suggest, however, is incorrect when you state that “…such a trade would erode ARIN’s control over the IPv4 address space….” In point of fact, neither ARIN nor any of the other regional Internet IP number registries (RIRs) has any jurisdiction or control over Legacy IPv4 numbers given out by the federal government or its contractors (of which ARIN is not and has never been one) unless, of course, that Legacy number block holder has been convinced to sign a contract with ARIN which then gives ARIN contractual authority over that specific number block. ARIN is a Virginia, non-stock (i.e., no stockholders) corporation, which later obtained exemption from federal taxation, just like any other chamber of commerce or business league. The concept of “jurisdiction” no more applies to ARIN than your local chamber of commerce’s “authority” over you. ARIN has no contract, written or otherwise, with the federal government, the federal government’s contractor (ICANN), or, for that matter, with the seller of the Legacy IPv4 number blocks. “Apparent authority,” based on repeated self-declarations of authority is not real authority, no matter how many times ARIN says it. In fact, recall that the IANA, a function under ICANN’s contract with the federal government (U.S. Department of Commerce), is the registry of record for the Class A Legacy blocks. We would encourage your readers to review the recent article published in the AIPLA by Ernesto Rubi, Esq. which also is found in our newsroom, for more information on this topic.

    Mr. Curran, truly a master at not answering a direct question, has continued to avoid a concrete answer to the question posed by the Professor: Does ARIN have authority over Legacy IPv4 numbers and their owners? Mr. Curran simply hides behind “buttoms-up policies” (mentioned 15 times in his response to the Professor) and a bewildering statement that “ARIN operates the registry according to the community developed policy and this includes all IP address blocks in the region including ‘legacy blocks’.” We have no idea what that means and, perhaps, neither does anyone else, but it certainly doesn’t answer the direct question. ARIN’s actual position, when it is sued, is just the opposite. In sworn affidavits in federal district court by Mr. Ray Plzak, then President and CEO of ARIN, he clearly states that: “Like other ‘legacy’ address holder’s issued resources before ARIN began, ARIN has never had an agreement with {the Legacy IPv4 owner} that would give it authority over those specific resources.” ARIN describes these “resources” (i.e. Legacy IPv4 number blocks) as “IP Resources Not Issued Or Controlled By ARIN.” We will not speculate as to why there is apparent reluctance to publically acknowledge and reiterate what has already been sworn to in a federal court of law.

    We believe and, through your published articles well before the founding of Addrex in 2009, it would appear that you too believe that this marketplace is good for the Internet. It will, in an efficient and effective manner, enable the redistribution of needed IPv4 number blocks. By unleashing the economic driving forces of supply and demand from the artificial constraints of a third-party “needs assessment”, the marketplace will enable underutilized number blocks to be redistributed to entities which will put those number blocks into actual use. Professor Mueller, you are far more persuasive and articulate in the articles cited above and found on our website. We encourage your readers to take the time to refresh their memories by rereading those articles, especially in light of the clairvoyant nature of your predictions. “Right On” comes to mind. This marketplace will help the Internet “community” grow and prosper. Many in the “community” mistakenly thought that the commercialization of Internet transport services, and the monetization of domain name registrations, would end the Internet. Instead, it created billions of dollars in value, technology employment and a world connected, even in revolutions, by a suite of Internet protocols, and ushered in an era of broader Internet adoption and utility. The marketplace in Legacy IPv4 number blocks will, despite the fears of a vocal few, help to bridge the technology gap in timing, global distribution, and the incompatibility with IPv6, while IPv6 gains favor and broader adoption.

    Finally, allow me to observe that this marketplace operates in parallel with ARIN’s distribution of its contract-based IPv4 number blocks. It is a marketplace which complements ARIN’s role and its sworn objectives of competition and portability found within its Articles of Incorporation. The marketplace is not, and does not seek to be, a replacement for ARIN. It is a means to help achieve our shared goals of continued Internet growth, stability and security.

    Respectfully,

    Charles Lee
    President
    Addrex, Inc.

    • John Curran

      Several of Mr. Lee’s remarks are well considered, particularly because of the overlap in his positions and that of the ARIN community.

      For example, it is recognized that a marketplace for IP address blocks will enable underutilized number blocks to be redistributed to entities which will put those number blocks into actual use, and the ARIN community has developed transfer policies for this very purpose.
      Another area of agreement is the purported goals stated by Mr. Lee of Internet growth, stability and security – these are definitely important goals held the ARIN community.

      However, there are differences in perspective that are too large to be done justice in a brief response, but I will outline some points for reader’s consideration:

      – ARIN was specifically formed to take over these registration services and (per NSF) “give the users of IP numbers (mostly Internet service providers, corporations and other large institutions) a voice in the policies by which they are managed and allocated within the North American region.” This was a conscious decision to change from USG directed operations to multi-stakeholder community-led self-governance (just as was done the ICANN formation which followed several years later)

      – How IP address blocks are maintained are of critical importance to the entire Internet community, and has implications for global routing, law enforcement, privacy, etc. ARIN provides a successful forum for discussion and resolution of these issues in an open and transparent manner. It is uncertain how these issues would be addressed if registry were not operated according to community policy.

      – There are ongoing public discussions regarding what transfer policies are most appropriate for the marketplace. Most recently, this has resulted in changes to policy including revising the needs-assessment test and simplifying how address blocks may be subdivided. These policies do have implications to the service provider community, and we encourage discussion of any other changes that will improve the marketplace.

      ARIN operates as part of the Internet number registry system as coordinated by ICANN, and while some of Mr. Lee’s goals may be achievable within that system, some clearly lie outside the present structure. It remains an open Internet governance question as to what process should be used in considering large scale structural changes to the system itself.

      Best,
      /John

      John Curran
      President and CEO
      ARIN

    • McTim

      Is perhaps the wrong question.

      The more central question (to me) is, “Under what conditions was the /8 allocated” In other words, was the block delegated by IANA to your customer with any provisos about it’s usage and what should happen if the block was no longer needed?

      Do you have a (redacted of course) copy of the document that granted the use of the /8 to your customer that you can post online?

      I know it is asking a lot in terms of transparency, but Milton is correct when he talks about “the “exceptional” status of IP address governance” in that IP address distribution is the most open, transparent and bottom-up of all Internet governance processes. I think the “marketplace” should uphold the same ideals.

  5. E.W.

    Mr. Curran,

    You’re saying that the Arin community is setup to create public policies regarding the transfer of IP address space, and I see that. In fact, that community welcomes all to participate and share their thoughts and have a voice in the policy, and I see that too.

    Now, Dr. Mueller seems to be saying that some of that IP address space was given out before the Arin community even existed and the owners of that IP space aren’t beholden to the well wishes of the community regarding what they can do with their IP space, and I see that too.

    Sometimes an analogy using not so technical comparisons can bring a point to light and may help technical people like yourselves better understand what each is trying to say so I’ll offer one here. Suppose you’re a farmer with a hundred acres of good land that’s been in your family for years, and that you’ve taken pride in cultivating crops on that land, bringing them to market, and ensuring a livelihood for your family while helping the people around you who buy your produce.

    Now suppose, over the years, people start moving in around you and what used to be open and free country becomes more crowded. The people form a community. The community incorporates into a town. The town forms a government – a well-meaning, democratic government where everyone in it can come to town meetings, voice their opinions, and vote on the issues of the day.

    Because free land is starting to become scarce, the democratic community passes a law that no one can just squat on free land and grow their crops. The remaining free land is put under the stewardship of the town, and if someone wants farmland, they have to apply for it at Town Hall, and a Board of Commissioners will decide who needs the land the most and how much each applicant can get. The applicant has to sign a Community Land Agreement that says if they later want to sell off some of their land, they have to get the Board’s permission and the Board has to approve the Buyer to make sure the Buyer really needs it.

    Now, one day the farmer decides he’d like to sell his land and retire. Or maybe he decides he just wants to give it away to his son who’s learned the ways of farming under his father. Someone on the Board gets wind of it and says, “No. You can’t do that. Only the Board decides how much land anyone can get in a land transfer according to our public policies.”

    The farmer replies, “This is my land. I own it. I can do with it as I please.”

    The Board member answers, “We appreciate all the work you’ve put into the land, which helped make this area so prosperous. In fact, you’re a part of our community too. Why don’t you come to the next town meeting and have your voice heard by others in the community? Maybe you can convince them to change public policy so you can sell your land to whomever you like.”

    Now the farmer isn’t a lawyer or a politician, but he has pretty good horse sense about these kinds of things. So his answer to the Board member is pretty clear. “You’ve invited me to participate in your meeting, and maybe I’ll do that one day if I have something to say about how the town is dividing up the land that it owns. But I own my land and what I do with it is up to me. It’s not up to a politician or a community, even if I’m part of the community.”

    “Fine”, says the Board member. “It’s true it’s your land and isn’t subject to the Community Land Agreement that others have signed and you can do with your land whatever you please. But if you sell it or give it to your son, we’re not going to recognize the sale in the County Register. And you know a lot of people look at that Register to recognize land ownership.”

    It’s about then, I think, that the farmer decides he’s had enough of community organizers and gets himself a good property attorney.

    And that’s where we seem to be now, if you get my analogy.

    – E.W.

    • John Curran

      E.W –

      An interesting analogy, but as with many analogies, somewhat of an imperfect fit to the reality of the situation.

      The point omitted is that the original “land” (to keep with your analogy) was created by the Internet community for a particular purpose, and was issued to parties by various predecessor registries so that the parties could participate in the Internet and/or use of Internet technologies. There were always rules and policies for how such address space should be used, and these policies which were refined by community discussion over the years.

      Your farmer was brought to the new land by ship with the plan of building a community, and it was agreed upon arrival that they should each settle on some land to start that process.

      The fact is that your farmer has forgotten how he got the land in the first place doesn’t relieve him of the obligations.

      Best wishes,
      /John

      John Curran
      President and CEO
      ARIN

      • Ernesto Rubi

        What continues to trouble me is this concept of “community” – akin to the incantations of the “proletariat” that many in the past have used to quash free will, free markets and progress.

        The first issue – which is an obvious one – is that the entire proposition/argument rests on the assumption that “the community can do no wrong.”

        The second is that ARIN’s argument that “our authority comes from the community” is devoid of any basis in reality. ARIN’s election process is open only to ARIN members – not to members of the Internet community (broadly defined as all those folks who use the Internet, have an interest in the Internet functions, or are affected by the Internet). In fact, it’s not clear how many ARIN members actually vote in the ARIN election process. If participation is less than 5% then how can ARIN claim to represent the “community”, much less its own members? And who counts the votes? ARIN? That’s process is obviously transparent right? =)

        I think using your logic you would agree that Raul Castro and Hugo Chavez are elected by their ‘community’ every 5 years…so…they’re not despots, thugs or ruthless dictators but rather – they are duly ‘elected’ in an ‘open’ process, in and they represent their wonderful-yet-starved community – the “ploretariat.”

        • John Curran

          Ernesto –

          The community is anyone who has an interest in Internet number resource policies. Anyone may participate, regardless of whether you have a number number resources, are a service provider, or are a member of ARIN.
          Feel free to get involved – see https://www.arin.net/participate/how_to_participate.html for details.

          Regarding whether the community can do wrong, what we have established a process by which everyone is equally able to participate by expressing a position and its basis.
          Policy proposals are considered in an open and transparent manner, and go through several stages of refinement before being adopted as new policy. We do utilize an elected advisory council to assist in policy development, but provide a low-threshold online petition as a check and balance on their actions.

          This process results in policy which has been discussed extensively before adoption, has had any concerns raised and considered, and still enjoys support of the community.

          To the extent that you have any suggestions for improvement of the policy development process, I would welcome any input.

          Thanks!
          /John

          John Curran
          President and CEO
          ARIN