IPV4 as a Commodity for Profit

Tue Feb 19 06:36:39 UTC 2008

On Feb 19, 2008, at 5:48 AM, Roderick Beck wrote:

> Hmm ... There is a market for brownstone apartments in NYC and also  
> for Cezanne's paintings and farmland ...
>
> There are plenty of markets that function well despite the absence  
> of 'production'.

Not especially illuminating comparisons, but I'm happy to indulge.
If access to address resources is nothing more than an aesthetic or  
status concern, then brownstones and Cezannes are fine comparisons.
Farmland is a better comparison, but you're wrong to add it to your  
list. It is constantly being created, and (more frequently)  
destroyed, e.g., when forested land is cleared, or countryside gets  
converted to subdivisions.

If you had said "land" itself, that would be been much more apt, at  
least if you think about what land meant back in the 19th century and  
earlier, when it was synonymous with self-determination (in both in  
economic and political sense).

> By the way, supply is not production.
>
> Supply how much will be offered for sale.

Excellent observation.
The quantity that can be offered for sale is a subset of the quantity  
that can be produced.
If the latter is open-ended, so the superset is unbounded, then those  
capable of offering something for sale tend to take that into account  
when deciding when and for what price to put what they have on offer.  
Sell now, or someone else will. Sell now, because there's no reason  
to assume that your terms will be better later.

Now try that in reverse.

> So I am totally unconvinced at this point.
>
> By the way, since markets do not involve compulsion.

Oh I see. If I had realized that libertarian posturing and not actual  
problem solving was the impetus for this thread, I wouldn't have  
bothered to chime in.

> So why not give it a try?

Because some mistakes can take decades or longer to correct.

> -R.
> Sent wirelessly via BlackBerry from T-Mobile.
>
> -----Original Message-----
> From: Tom Vest <tvest at pch.net>
>
> Date: Tue, 19 Feb 2008 13:26:03
> To:nanog at merit.edu
> Cc:Rod Beck <Rod.Beck at hiberniaatlantic.com>,Iljitsch van Beijnum  
> <iljitsch at muada.com>,David Conrad <drc at virtualized.org>,Brandon  
> Galbraith <brandon.galbraith at gmail.com>
> Subject: Re: IPV4 as a Commodity for Profit
>
>
> 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.
>>
>