Sat, 10 Nov 2007

IPv6 economic nonsense

Geoff Huston writes about ipv6, in the Internet Protocol Journal, "So far the business case for IPv6 has not been compelling, and it appears to be far easier for ISPs and their customers to continue along the path of IPv6 and NATs". This is true, because the magic moment for IPv6 has not yet been achieved. When people want to buy Internet access, they want the whole Internet, not just the part reachable by IPv6. Until an IPv6 address can reach the entire IPv4 internet, it will have zero economic value.

But the real nonsense is in the next article by Iljitsch van Beijnum. He's talking about the current consumption of the IPv4 address space. This is the driving consideration behind IPv6. There's nothing in the IPv6 protocol we need, particularly, besides its 128-bit addresses. They could simply have expanded IPv4 with 64-bit addresses, preserving all the existing algorithms and code with simple changes. Instead of holding an IP address in a 32-bit int, an IPv4-64 could have held it in a 64-bit long. Phil Karn argued for that change, but in the end, lost.

Iljitsch acknowledges that free markets have a role to play in the extension of the IPv4 address space. He objects to this, saying

This scenario has several [two -russ] problems. First, when supply is limited and demand is high, prices rise and hoarding becomes lucrative. So the effect of making address space tradeable could be a reduction of available address space rather than an increase. And certainly, as trading IPv4 space becomes more likely, holders of large address blocks will be less inclined to return them. Finally [Secondly, as there are only two objections -russ], more than half of the IPv4 address space in use is held by organizations in the United States, whereas the developing world has comparatively little address space. The prospect of having to buy address space from American companies that got the space for free is not likely to be popular in the rest of the world.
Emphasis mine.

The first emphasized text, "hoarding becomes lucrative" is complete nonsense. How is something lucrative when you hoard it?? How is that even logically possible? Lucrative derives from the word lucre, defined as monetary gain. To hoard something is to accumulate for future use. You can't both use something and sell it for monetary gain! You either get the use or you get the gain; not both.

He goes on to predict that a market for tradeable IPv4 address space will result in ... no market at all. Well, I'm sorry, but you can't both predict that there will be a market for something, and that nobody will use it. If nobody uses it, then there is no market. That's like Yogi Berra's unintentional quip that "Nobody goes to So-and-so's nightclub anymore because it's so crowded."

The second emphasized text is also complete nonsense. Why object simply because American companies got the space for free? Would Iljitsch also object if American companies had gotten the space for a penny an address? What about a dime an address? What about a dollar an address? Would he also object if the American companies were going to end up losing money? To be fair, he is not obviously objecting himself, but is instead saying that other people will object.

Clearly his objection is not to the price that American companies paid, but to the fact that they can sell them for more than they paid. That's called profit, and it's why companies exist. Yes, most of them aren't in the IPv4 address farming business, but they're also not in the real estate business even though some of them own property much more valuable than the business transacted thereon. Nobody suggests that it's unfair for them to sell their property at the appreciated value.

Sometimes companies acquire something which becomes much more valuable through no action of their own. They are just lucky. In this case, however, these companies acquired IPv4 addresses, and by their use of them, created value in those addresses. So, while Iljitsch thinks he's raising an issue of fairness (rich American companies selling IPv4 addresses at a vast profit to poor third-world ISPs who would otherwise be forced to employ homeless people to beg for IPv4 addresses on streetcorners), he's actually ignoring an issue of fairness. If you own something and make it more valuable, then it's only fair for you to sell it for a higher price.

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