The coming trade war in IP address blocks

An important proposal for inter-regional market transfers of IP addresses has been put before RIPE-NCC, the Internet protocol address registry for the European region. The proposal notes that “there is a significant over-supply of IPv4 in North America versus the rest of the world,” and that “in a global economy, membership in any particular RIR should not be a barrier to acquiring IPv4 Addresses when the source is not within the same RIR region.”

The proposal attaches four basic conditions to inter-regional transfers of address resources:
1. The IPv4 addresses will be used for business purposes and will not be sold within 15 months.
2. The IPv4 addresses will be used to meet current and future operational requirements.
3. The IPv4 addresses will be used in conformance with all provisions of EU Directive 2002/58 Article 13 (Anti-Spam).
4. Where the recipient is in another region, the conditions on the recipient as defined in the counterpart RIR’s transfer policy at the time of the transfer will apply.

The last condition shows how much this policy problem starts looking like a classic trade issue. Think of the region where the seller of the IP address block is registered as the “exporter” and the region where the buyer is located as the “importer.” Members of ARIN, where most of the surplus IPv4 is, would benefit by restricting other North American members from exporting IPv4 address blocks to the Asia-Pacific region or Europe because it would lower the price and increase the supply of v4 blocks available in their own region. By knocking out buyer competition from other world regions, buyers in the ARIN region would benefit from a form of protectionism. Also, ARIN as an organization has an incentive to play the protectionist game. By controlling conditions on inter-regional transfers, ARIN maintains exclusivity over the terms and conditions of a large part of the available IPv4 blocks.

So it is a mistake to give the exporting region the power to define the conditions determining who can or cannot receive exported blocks in other regions. What we need is a globally harmonized IPv4 trading policy, one that imposes uniform conditions on all buyers and sellers in all regions. Yet the regionally fragmented RIR system is probably incapable of passing such a policy. As I have argued in a recent paper, the conflicts of interest among the regional organizations and the members in different regions create huge barriers to the kinds of globalized reforms in IP address policy that are needed now.

The fate of the RIPE-NCC interregional transfer proposal (2012-01), therefore, is very much worth watching. If it fails to get anywhere, it confirms the hypothesis that the RIRs are structurally incapable of adapting to the new world of IPv4 scarcity and IPv6 migration.

5 comments

  1. Andrew Dul

    Milton,

    Just because a specific policy fails to gain consensus in a region does not necessarily mean that the RIR process is completely flawed.

    I agree that the RIR process is not perfect, but I think you over exaggerate its flaws especially when another “better” alternative is not readily apparent. The RIRs can change to be molded to the changing environment, if they didn’t there would be no transfer policies in any of the regions.

  2. John Curran

    Milton –

    You state:
    “What we need is a globally harmonized IPv4 trading policy, one that imposes uniform conditions on all buyers and sellers in all regions.”

    There is absolutely nothing preventing you from submitting a such as a global policy proposal, and as a member of the community you should consider doing so if you feel that is the best manner for management of the Internet number resource pool. If you need any assistance with this, I’d recommend contacting one of the Address Support Organization (ASO) Advisory Council members or Chair for details -http://aso.icann.org/people/address-council/address-council-members/

    You further note:
    “Yet the regionally fragmented RIR system is probably incapable of passing such a policy. As I have argued in a recent paper, the conflicts of interest among the regional organizations and the members in different regions create huge barriers to the kinds of globalized reforms in IP address policy that are needed now.
    The fate of the RIPE-NCC interregional transfer proposal (2012-01), therefore, is very much worth watching. If it fails to get anywhere, it confirms the hypothesis that the RIRs are structurally incapable of adapting to the new world of IPv4 scarcity and IPv6 migration.”

    To be clear, the fate of any one particular regional policy proposals for transfers does not imply that a global policy could not be adopted; it is only the lack of anyone proposing such a global policy which assures there will not be one adopted.

    Thanks!
    /John

    John Curran
    President and CEO
    ARIN

  3. Sandra Brown

    Milton,

    Thank you for your comments and support for Proposal 2012-01, which I have authored. I am a principal of IPv4 Market Group, at http://www.ipv4marketgroup.com, and as an organization which brokers sales between companies with excess IPv4 and companies in need of IPv4, we are very interested in seeing the RIPE marketplace open up to IPv4 transfers. As you know, Proposal 2012-01 is not written in a way that a commercial organization with a desire for an open marketplace would typically take, but, I have chosen to compromise and put forth a proposal which I believe has the most likelihood of being accepted in the short term by the greatest number of supporters. In the longer term, once inter-RIR transfers work well, it is my hope and desire that all RIR’s will break down the barriers to free market transactions.

    That said, IPv4 transfers, and specifically inter-RIR transfers, are a good thing for all concerned. As you know, if we do not allow funds to flow to the holders of dormant IPv4 addresses, they have no incentive to free them up for use. We are seeing a global willingness to pay for IPv4 as companies in need are faced with the proposition of doing without, and they are willing to pay for it. I personally have not encountered any people buying for the purpose of price speculation, and in my opinion, there will be adequate supply to discourage speculation, if the RIR’s loosen the restrictions on the marketplace to allow the market to govern the transactions. Over time, the price should fall, as the conversion to IPV6, which is more extensive in Asia than I had originally thought, takes hold, and this should ultimately discourage speculation. One never knows when the price will drop.

    So, the arguments in favor of needs justification are, to me, outdated. I don’t like to offend anyone, so I apologize for saying needs justification represents historical viewpoints, the vocal minority in some circles voting on behalf of the silent majority. As a business person, I favor a market approach, and I remain hopeful, that over time, IPv4 Market Group is able to work collaboratively with all of the RIR’s to share ideas so that we all benefit: we keep the registries very accurate, we allow businesses to acquire the IPv4 addresses that they need to conduct their businesses in a fair and economical manner, and the supply of IPv4 is increased so that prices are reasonable on a global basis. That is the objective of IPv4 Market Group: to work with the RIRs closely so that we meet the needs of buyers and sellers of IPv4 addresses in the best possible way.

    Sandra Brown

  4. John Curran

    Sandra –

    Thank you for your comments on this important topic. I also hope that the everyone in the community is able to work collaboratively to reach policies to the benefit of all. One point you raise is particularly important (and quite germane to the essence of Internet Governance), specifically:

    I don’t like to offend anyone, so I apologize for saying needs justification represents historical viewpoints, the vocal minority in some circles voting on behalf of the silent majority.

    How indeed should we get more participation of the asserted silent majority in these discussions? It is very difficult for any system to consider views of those not participating in the process, so any thoughts or suggestions that you have in this area would be welcome.

    Thank you again!
    /John

    John Curran
    President and CEO
    ARIN

  5. Mike Burns

    I am a principal of IPTrading.com, specializing in buying, selling, and brokering IPv4 address space. Like Sandra in her region, I was the original author of ARIN 2012-1, which was a rewrite of the existing ARIN IPv4 Transfer policy. Also like Sandra, I have a dim view of the needs-test for transfers. Unfortunately although my attempt to get rid of the needs testing failed, at least the new policy, which is currently in “last call”, will allow for the inter-regional transfer of address space while protecting the remaining ARIN free pool. We expect ARIN will be an exporter, and APNIC to be an importer, but the new policy allows for space to transfer in both directions, should it be implemented. I find it interesting that brokers were the original authors of similar transfer policies in ARIN and RIPE, and perhaps it can be taken as a sign that the RIR structure might still be able to come to grips with the new world of IPv4 scarcity. We need more vocal participation in the RIRs if we are to change RIR policies with an eye towards the implementation of a free-market in IPv4 transfers.
    Mike Burns