[address-policy-wg] The price of address space

On 22 Jul 2009, at 16:18, <michael.dillon at bt.com>  
<michael.dillon at bt.com> wrote:

> Where is the industry going to find 1.2 billion dollars to sustain
> growth of the network after IPv4 runout? And where is a new entrant
> going to find $100,000 to buy their first allocation, assuming that
> the price doesn't rise even higher when the free alternative no
> longer exists?

I'm reminded of the late 90's .com joke/business model about how to  
becomea multi-billionaire: Set up a company with 100Bn shares. Sell  
one share to yourself for $5. Congratulations! Your company is now  
worth $500Bn. So exchange your company's paper for a medium-sized  
country.

To be serious, I think it's unwise to extrapolate from your anecdote  
about someone offering a six figure sum for a /20. Or to use that as  
the basis for a valuation of the allocated and/or yet-to-be-allocated  
IPv4 address space. For one thing, who could possibly know for sure if  
the figure you quoted that was offered recently will be the going rate  
for a /20 after the IPv4 run-out? If someone can do that, please  
provide me with the winning numbers for next week's lottery.... :-)

If we assume there will be a market in IPv4 after the run-out, we  
should expect the usual laws of supply and demand will mean there's  
some sort of price equilibrium in the market. The market price will be  
what someone's prepared to pay and what someone is willing to sell  
for. That price will flunctuate and depend on too many imponderables  
and variables that can't easily be controlled or predicted today. Just  
like any predictions for the prices of shares or exchange rates or  
commoditiies N years in the future. If IPv4 costs too much -- say  
because demand exceeds supply -- other solutions will emerge and be  
adopted. For instance more use of NAT and ALG (if these turn out to be  
cheaper than buying a /20 or whatever). Or, radical thought, there is  
more uptake of IPv6 because these addresses cost next to nothing at  
the RIR.

The point I'm making is that it doesn't seem sensible or even possible  
to predict what these prices might be post run-out. Or worry too much  
about that. Or to invent policies which somehow influence or control  
those prices. [That might well have the look and feel of a cartel.] It  
would be an interesting academic exercise for economists to model the  
impact of various pricing scenarios though I'm not sure how useful  
that would be in practice. That said, it would be nice to have some  
sort of idea of the price points where the trade-offs between buying  
IPv4 or using more NAT/ALG or deploying IPv6 start to get fuzzy.

Any market that develops should be self-correcting. So if the going  
rate for IPv4 address space is too expensive, there will be other  
options. This has obvious parallels with everyday activity. For  
instance, if the cost of heating my home gets too costly, I can look  
for a better paying job; or find a cheaper supplier;  or turn down the  
thermostat; or wear warmer clothing; or improve the insulation; or  
install a more efficient boiler; or reduce the hours that the heating  
is on; or some combination of these.

Is there some reason to assume comparable dynamics won't apply to IPv4  
post run-out?