IPV4 as a Commodity for Profit

Tue Feb 19 05:26:03 UTC 2008

It's good that this discussion is happening now.
To make the discussion as productive as possible, it's probably a  
good idea to clarify assumptions and terms.
We all know what "market" means -- but in all likelihood many of the  
things we all "know" do not overlap, and some are probably mutually  
contradictory.

If thinking about IPv4 addresses as a "commodity" has any validity,  
it comes from the assumption that making them subject to "market  
pricing" will increase supply, i.e., incentive current surplus  
holders to make that surplus available to would-be buyers.

In other "commodity" markets, the connection between market pricing  
and increased supply is *production* -- i.e., when the revealed price  
of a commodity goes up, those who are capable of making it are  
motivated to make more, or to jump into the market for the first  
time. In other commodity markets, that motivation is bounded by the  
threat of alternative suppliers, by the impracticality of hoarding,  
and by the inability of the potential seller to use more of the  
commodity directly. In other words, the existence or potential  
emergence of alternative producers/suppliers tends to discourage  
hoarding to maximize prices (because there's no guarantee that prices  
will stay high, much less go even higher), and the lack of direct  
"use value" reduces any countervailing incentive that the prospective  
seller to just hold the assets in perpetuity, until they can be used  
in-house.

In the case of IPv4 addressing, none of these bounding conditions  
apply. No more IPv4 addresses can be produced, and they're almost  
certain to have unique (if not irreplaceable) use value, at least for  
some classes of ISPs that exist today, for at least a decade or more  
(or as long as those kinds of ISPs exist, whichever is shortest).  
That means the potential price is always going to be higher tomorrow  
than it is today, right up to the day before the last day that IPv4  
becomes useless. Which means hoarding is going to continue to be the  
most sensible behavior for all surplus holders -- even those that no  
longer have any Internet-related ops or business interests.

This countervailing incentive is much stronger for surplus holders  
that *do* still have such interests. Knowing that IPv4 addresses that  
they might need in the future will certainly cost more (maybe lots  
more) than whatever price they could command for surplus IPv4 today,  
growing ISPs are not likely to contribute much to the salable,  
"liquid" address pool. Worse still, so long as IPv4 continues to be a  
non-substitutable, must-have input for certain kinds of ISPs, ISPs  
like that will know that the threat of competition from existing or  
hypothetical future competitors will be absolutely limited by the  
availability of IPv4 address space. For them, making IPv4 address  
space unavailable to competitors is a perfectly sensible "use", and  
one with quite a lot of value.

An unmediated market is not going to "work", for almost any meaning  
of that term. Get over it.

Anyone who disagrees should point out anything disputable in the  
above, or else clarify what they actually think/hope that an IPv4  
address market will achieve.

TV

On Feb 19, 2008, at 12:04 PM, Rod Beck wrote:
> I am not sure it's a perfectly functioning market.
>
> The whole point of a market is to penalize the holding excess  
> inventory of IP addresses.
>
> There is no penalty today because there is no opportunity cost to  
> holding excess inventory. :)
>
> What's amazingly ironic is how the free market guys suddenly vanish  
> when one wants to apply free markets to their industry ...
>
> :)
>
> Roderick S. Beck
> Director of European Sales
> Hibernia Atlantic
> 1, Passage du Chantier, 75012 Paris
> http://www.hiberniaatlantic.com
> Wireless: 1-212-444-8829.
>