[address-policy-wg] 2007-08 Review Period extended until 9 July 2008 (Enabling Methods for Reallocation of IPv4 Resources)

Hi Geoff,

Thanks for the response. This is all very interesting!

On Jun 13, 2008, at 11:09 PM, Geoff Huston wrote:

> Tom Vest wrote:
>
>> The only question -- and the one that people seem to be unwilling  
>> to engage -- is whether this particular prohibition was always  
>> inherently silly or rather important in its own right, whether the  
>> infraction to be legalized was/is trivial or truly dangerous.
>
> This strikes me as a generalization arising from a false premise -  
> namely
> that the external environment has not changed in any manner, and the  
> change
> is purely a change in the manner in which the address distribution  
> function
> occurs. Of course that is simple not the case here, which becomes  
> apparent
> in looking at the question you then posed:
>
>> ftp://ftp.ietf.org/ietf-online-proceedings/95apr/area.and.wg.reports/ops/cidrd/cidrd.rekhter.slides.ps 
>>  Was Yakov always wrong? Has something changed to make him less  
>> wrong today?
>
> Was Yakov always wrong? no
>
> Is he less "wrong" today - dunno - he was right back then, but the  
> environment
> HAS changed, so the "less wrong" question is rather irrelevant isn't  
> it?
>
> As most folk on this planet are aware (and elsewhere too these days,  
> considering
> the level of air play of this particular story :-) ), the  
> environmental shift from the perception of abundance in IPv4  
> addresses at the time to a current perception
> of scarcity and looming exhaustion is a massive change in our  
> environment.
> This percpetion is now driving industry behaviours, and I'd claim  
> that the
> steady increasing address allocation rates over the past 2 - 3 years  
> are not
> unconnected with this shift in perception.
>
> The observations that apparently drive much of today's consideration  
> are:
>
> - this industry is just too large, too diverse and too bound to low  
> margin
> commodity operations for much of it's Internet activities to drive  
> (and fund)
> the completion a comprehensive transition to IPv6 within the  
> timeframe  available as defined by the remaining IPv4 unallocated  
> address pools.

This is an interesting observation. How much would you say is the  
additional marginal capital cost of migrating to IPv6, for a network  
operator that has purchased network gear in the last 2-3 years?  
Presumably anything older that that will be coming up for refresh  
anyway, and anything newer than that would be pretty good to go,  
wouldn't it? Do you think that the costs scale roughly in line with  
the stakes involved -- i.e., that large operators with large capital  
stocks and large market shares will face greater costs than smaller  
operators, or do you think that the gross costs and benefits are  
somehow misaligned?

If they are aligned, then I'm not sure why the size or the diversity  
of the Internet should have any bearing at all on this. Doesn't  
competition help to reveal when margins are really "too low" -- in  
fact, isn't competition the only way to know what margins are, or what  
they should be? And if there is no competition, calculation of margins  
are pretty arbitrary, aren't they?

> The  demand for addresses, as defined by the prevailing needs-based  
> address
> distribution policies and the associated industry demand levels,  
> appears
> to extend beyond the anticipated point of exhaustion of the current  
> supply system.

I think everyone would agree that the demand for *logical attachment  
to the Internet*, as currently/contingently illuminated by the IPv4  
run rate, clearly shows that demand is going to continue beyond the  
point of IPv4 free pool exhaustion...

> - this implies that there will be a continuing need for IPv4  
> addresses after the
> RIR pool has exhausted within this industry.

Okay, so the demand for attachment will continue unabated, and  
technically that demand can only be satisfied, directly or indirectly,  
with IPv4 resources -- because IPv6 is not backwards compatible "on  
the wire", and because all of the edge resources of interest to  
current and future end users are now attached via the IPv4 resources  
of incumbent operators.

> - It is also observed that there is considerable diversity in the  
> current
> value of "use" of addresses today, and it is likely that this broad
> diversity of exploitative value of addresses will persist.

That's an interesting way to phrase things! We are confronting a zero  
sum game, in which "low value" resources that cannot justify the value  
of their attachment will go under so that more valuable resources may  
be attached. Actually, since that value calculus will be expressed in  
terms of willingness to pay, perhaps we should restate in clearer  
terms: big money players will buy out small money players, until an  
equilibrium has been reached where no player is so small that it can  
be bought out by another.

> It appears that in this case once the existing supply mechanisms  
> have been exhausted, then the supply mechanisms to meet the  
> continued demand will come from existing holders of address space.  
> Its also pretty clear that such supply
> mechanisms will not meet every last possible demand, so a regime of  
> scarcity-based
> redistribution will eventuate to equilibriate supply and demand. In  
> such scarcity-based
> redistribution mechanisms, those applications that place a higher  
> exploitative value
> on IPv4 addresses would be capable of making a case to transfer  
> addresses from
> an existing address holder who has a lower value associated with the  
> addresses.

So far I think I summarized pretty accurately... if somewhat less  
clinically.

> This equilibriation is conventionally based on establishing a  
> valuation point whereby
> the residual demand levels can be met in that those demands where  
> the exploitative
> value is still higher that the valuation point will be satified, and  
> those who have
> placed a lower valuation on meeting their demand will seek  
> substitutes.

Ahh okay, so what are the available substitutes, and what is the scope  
of their substitutability?
Would you say that an aspiring new entrant that wishes to multihome  
sometime in the eternal post-free pool age that is about to begin --  
and actually provide normal ("full" interdomain) Internet access to  
customers -- would be able to go into business with IPv6 alone, or RFC  
1918 space alone, without a single IPv4 address? If not -- if they  
will need at least that a couple of /32s to attach to other networks  
-- then in effect you have conceded that there is no substitute, at  
least for future network operators that aspire to enjoy a level of  
resilience, flexibility, and "autonomy" equivalent to that which has  
been available to every network operator to date.

What would have to change in order for the possibility of "true, full"  
substitution to be restored, and who would have to change it? Won't  
that day have to wait until a preponderance of Internet resources --  
users, content, services, etc. -- are "made accessible", either by  
being renumbered into IPv6 themselves, or via some other kind of  
mediated service, either of which would have to be undertaken by  
incumbent IPv4 operator/seller -- i.e., the same institutions that  
have been incentivized by the transfer market to capitalize on the  
value of IPv4 for as long as possible?

Now why would a service provider in a hotly contested market,  
especially one that is otherwise "too bound to low margin commodity  
operations" *ever* willingly give up that market lever and revenue  
opportunity? Even if one attempted to, their high margin IPv4  
resources would just get snapped up by a more aggressive competitor,  
and nothing would change.

Please point out the flaws in my logic, because this sounds to me like  
a perfect, inescapable trap -- one that closes the industry to all but  
superficial/subordinate entry permanently, and guarantees that the  
transition to non-dependence on IPv4 could take forever, literally.


> Now all of this would be irrelevant if we were still in an environment
> of abundance - all those who had a case for addresses, whatever the  
> exploitative value
> each party places on the addresses, could be met, in which case you  
> get back
> to the proposition that the only residual 'value' of a particular  
> address over any other
> is the relative ease with which it is routed - which is what Yakov's  
> slide pack is effectively
> saying.

I think I understand your point, but if I do this is just a  
restatement of an old economics joke.
Econ prof and student walking across the campus, both look down and  
see a $20 bill as they step on/over it.
Prof never breaks stride, student asks "But Professor, why didn't you  
pick up the money?"
Professor says, "I didn't bother because it couldn't have been there  
-- if it was, somebody else would have already picked it up!"

So, the value of routes will be attested to by the fact of their being  
routed, and the nonvalue of nonroutes will be equally self-evident...

> But this is all basic theory of markets, isn't it Tom. I don't I've  
> said a single thing
> about market valuation, exploitative values and substitution that  
> isn't in any
> standard text on the theory of markets!

I should have read more of standard texts I guess. However, I never  
found that they had much relevance at all in this sector.
In this sector, however, I have seen countless examples of critical,  
non-substitutable, bottleneck inputs being strategically rationed by  
incumbents, with the sublimely rational goal of precluding any/all  
competition that did not guarantee them the lion's share of any  
increased revenue or market growth that anyone realized as a result.  
An equal share of a bigger pie is never enough -- that's just economic  
rationality at work.

> Is routing so fragile that addresses cannot move at all? I think not.
>
> Is IPv6 so busted and NATs just so unworkable that any form of  
> substitution is completely
> untenable? I think not.


I eagerly await clarification in this substitutability question --  
because if I'm wrong, perhaps things are not so dire.


> Are there addresses out there that are unused, or used in contexts  
> where subtitution may
> take place? I believe so.


Lately I hear this as justification for the assumption that all  
"underutilized" IPv4 will be consolidated in 1-2 years post-runout. So  
let's just stipulate this, and focus on what happens after that.

> So I'm left with a question or two back to Tom via this list: Why do  
> you think that in this
> case the conventional mechanisms that we've use explicitly or  
> implicitly to equilibriate demand, supply and substitution within  
> human activity sectors for, oh, a millenium or five, in times of  
> scarcity of supply and competing demands have to be
> suspended and some magic substituted in its place just for IPv4  
> addresses?

Actually, there is an important class of finite resources for which  
the "conventional mechanisms" were never applied, precisely because  
the resources in question played an integral role in facilitating all  
of the other exchanges in the economy, helping to keep them  
"efficient" with low transaction costs, etc. These resources were also  
generally held in escrow by a central authority, which was the only  
authorized recipient of freshly discovered stocks of the resource, and  
also the only authorized top-level source from which others could  
secure this resource. Like all growing systems, these eventually hit a  
ceiling with their finite critical resource also, and had to  
transition to a different quantity-unconstrained substitute --  
episodes which may provide some useful insights for our own predicament.

I can tell the full story later if there is interest, but suffice it  
to say that there are other relevant precedents and mechanisms.

> And the second question is: Equally I'm really unclear what you see  
> as the alternative
> framework to use here to address the situation. Do you believe that  
> there are credible
> alternative approaches that do not involve the movement of IPv4  
> addresses between
> entities beside the "lets do a complete IPv6 transition in the next  
> 24 months across
> the entire globe" approach?

Since that's not a credible alternative either, let's hope so!

Actually I do have an idea, but it would require that the tempo and  
discomfort of the transition to be distributed in direct rather than  
inverse proportion to the stakes and capability of the parties  
involved. In other words, it would require that the largest operators  
(i.e., those most capable of transitioning, but also of postponing  
their own pain for as long as possible -- and also of directly causing  
the discomfort experienced by others to endure for as long as  
possible) to start their own (perhaps very very gradual) transition,  
sooner rather than later. Small and medium-sized operators too, the  
point being to get everyone on a transparent -- not necessarily equal  
or lockstep or aggressive, just transparently "confidence inspiring"  
-- timetable, at the end of which IPv4/IPv6 substitutability concerns  
are eliminated for all time.

Note that this envisions nothing more than a modest acceleration of  
what the rosy scenarios predict will be inevitable in the 2-3 years  
post-runout, when all "loose" IPv4 will be spoken for -- and would  
preempt the sort of equally plausible but gloomier outcomes that some  
people (not just me) have described.

Again, I could provide details later if there is interest, perhaps in  
another forum if that would be more appropriate...

TV, speaking for self only