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From: Tom Vest <[email protected]>
Date: Tue, 19 Feb 2008 13:26:03
Cc:Rod Beck <[email protected]>,Iljitsch van Beijnum
<[email protected]>,David Conrad <[email protected]>,Brandon
Galbraith <[email protected]>
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
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 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.
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
1, Passage du Chantier, 75012 Paris