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Dear
SIG members

An
updated version of the proposal 'IPv4 address transfers' has been sent to the
Policy SIG for review. It will be presented at the Policy SIG at APNIC 26 in Christchurch, New Zealand,
25-29 August 2008.

The
proposal's history can be found at:

http://www.apnic.net/policy/proposals/prop-050-v003.html

This
new version of the proposal has expanded commentaries in sections 2 and 5.
Section 3 now includes a reference to the transfer proposal under discussion in
the ARIN region.

We
invite you to review and comment on the proposal on the mailing list before the
meeting.

The
comment period on the mailing list before an APNIC meeting is an important part
of the policy development process. We encourage you to express your views on the
proposal:

- Do you support or oppose this proposal?

- Does this proposal solve a problem you are experiencing? If so,

tell the community about your situation.

- Do you see any disadvantages in this proposal?

- Is there anything in the proposal that is not clear?

- What changes could be made to this proposal to make it more

effective?

randy
and jian

________________________________________________________________________

prop-050-v003:
IPv4 address transfers
________________________________________________________________________

Author:   
Geoff Huston

gih@apnic.net

Version:  
3

Date:     
22 July 2008

1. 
Introduction
----------------

This
is a proposal to amend APNIC policy restrictions on the transfer of
registration of IPv4 address allocations and IPv4 portable address assignments
between current APNIC account holders. This proposal is a refinement of the
historical resource transfer policy and applies to
IPv4
resources held by current APNIC account holders.

2. 
Summary of current problem
------------------------------

Current
APNIC policies relating to the registration of transfer of address holdings
limit the eligibility of registration of transfers to those relating to mergers
and acquisitions of entities that are administering an operational network.

It
is currently anticipated that the IPv4 unallocated address pool will be
exhausted in a timeframe of between 2009 and 2011. There is a very considerable
level of investment in IPv4-based services in the Asia Pacific region, and a
transition to IPv6-based service delivery is likely to take longer than the
remaining period of unallocated address availability. Accordingly, it is likely
that demand for IPv4 addresses will continue beyond the time of unallocated
address pool exhaustion, leading to a period of movement of IPv4 address blocks
between address holders to meet such continuing demand for IPv4 address blocks.

It
is the objective of the APNIC IPv4 address registry to accurately record
current address distribution information.

This
proposal allows APNIC to recognise the transfer of IPv4 addresses between
current APNIC account holders, and places some constraints on the parties to
the transfer as a precondition for the registration of the IPv4 address
transfer to be undertaken by APNIC.

The
underlying assumptions behind this policy proposal are:

- There will continue to be need for additional IPv4 address

resources in the AP region after the exhaustion of the APNIC

IPv4 unallocated address pool

- The amount of returned address space to APNIC will not meet

those needs

- Some IPv4 address holders will be in a position to release

    address space and convert to NAT or similar solutions
if they

are given some level of incentive

- Some amount of transfer of address space will occur in the

APNIC region following the exhaustion of the unallocated IPv4

address pool

- The registry of IPv4 addresses operated by APNIC is of general

utility and value only while it accurately describes the current

state of address distribution. If a class of address movement

transactions are excluded from being entered in the registry,

then the registry will have decreasing value to the broader

community.

This
proposal's central aim is to ensure the continuing utility and value of the
APNIC address registry by allowing the registry to record transactions where
IPv4 addresses are transfered between APNIC account holders.

It
proposes that APNIC will recognise and register a transfer of addresses where
the parties to the transfer are 'known' to APNIC and that the address block
being transferred is part of APNIC's current
(non-historical)
address set

The
proposal does not:

- Prescribe how such transfers may occur, nor

- Impose any further constraints on the transfer or on the parties

involved.

3.  
Situation in other RIRs
----------------------------

Proposals
for address transfers similar to this proposal are being discussed at the
following RIRs:

RIPE

2007-08: Enabling Methods for Reallocation of IPv4 Resources

http://www.ripe.net/ripe/policies/proposals/2007-08.html

ARIN

Policy Proposal 2008-2: IPv4 Transfer Policy Proposal

http://www.arin.net/policy/proposals/2008_2.html

4.  
Details of the proposal
----------------------------

APNIC
will process IPv4 address transfer requests following the adoption of this
proposed policy, subject to the following conditions:

Conditions
on the IPv4 address block:

- Only IPv4 address blocks equal to, or larger than, a /24 prefix

may be transferred.

- The address block must be in the range of addresses administered

by APNIC, either as part of a /8 address block assigned by the

IANA to APNIC, or as part of a historically-assigned address

block now administered by APNIC.

- The address block must be allocated or assigned to a current

APNIC account holder.

- The address block will be subject to all current APNIC policies

from the time of transfer. This includes address blocks

previously considered to be "historical".

Conditions
on source of the transfer:

- The source entity must be a current APNIC account holder.

 - The source entity must be the currently registered holder of the

IPv4 address resources, and not be involved in any dispute as to

the status of those resources.

- The source entity will be ineligible to receive any further IPv4

address allocations or assignments from APNIC for a period of 24

months after the transfer.

- In making any future IPv4 address resource requests to APNIC,

for as long as IPv4 address resources are available from APNIC,

following the expiration of this 24 month ineligibility

period, the source will be required to document the reasons for

the IPv4 address resource allocation.

Conditions
on recipient of the transfer:

- The recipient entity must be a current APNIC account holder.

- The recipient entity of the transferred resources will be

subject to current APNIC policies. In particular, in any

subsequent APNIC IPv4 address allocation request, the recipient

will be required to account for all IPv4 address space held,

including all transferred resources.

- APNIC fees payable by the recipient will be assessed on the

basis of all resources held.

The
address transfer process:

After APNIC is notified of the transfer by both the source and the

recipient of the transfer:

1. APNIC will update the registration records relating to the

transferred addresses.

2. APNIC will adjust the source's address holdings as of the date

of transfer.

In terms of membership and/or service fee calculations this

shall be processed in the same manner as a return of address

holdings to APNIC as of that date.

3. APNIC will adjust the recipient's address holdings to include

the transferred addresses as of the date of the transfer.

In terms of membership and/or service fee calculations this

shall be processed in the same manner as an allocation or

assignment of address holdings to the recipient as of that date.

In order to preserve aggregation capabilities the transfer

recipient may notify APNIC that the transferred address may be

returned to the unallocated APNIC address pool, and a different

address of the same size may be registered to the recipient of

the transfer. This option would be available to the recipient

of the transferred address, at the discretion of the recipient,

and subject to availablility of an alternate address block from

APNIC

4. The following transfer details will be published by APNIC in a

public log of resource transfers:

- Source

- Recipient

- Address resources

- Date of transfer

Transfer
fees:

APNIC may charge the recipient a service fee on the transfer

transaction. The transfer service fee may vary according to the

total size of the address block being transferred.

The transfer fee schedule shall be set initially by the APNIC

Executive Council upon adoption of this policy.  The transfer fee

schedule will be included as part of any future review of APNIC

fees and charges.

5.  
Advantages and disadvantages of the proposal
-------------------------------------------------

5.1
Advantages

This
proposal, by acknowledging the existence of address transfers and registering
the outcomes, would ensure that the APNIC address registry continues to
maintain accurate data about resources and resource holders. The proposal also
ensures that those parties who currently rely on the accuracy of this
registration information can continue to rely on the currency and accuracy of
this information in good faith. In particular, it would:

- Ensure that the APNIC registry continues to reflect the current

actual status of IPv4 resource holdings by APNIC account holders.

- Mitigate the risks to the integrity of the network, and its routing

and addressing infrastructure in particular, associated with the

unregistered transfers of IPv4 addresses.

- Provide a stronger incentive for unused IPv4 address space to

return to active use, helping to satisfy residual demand for IPv4

address space across the IPv6 transition.

5.2
Disadvantages (and responses)

5.2.1
 Altering the traditional concepts of
IP addresses

This proposal has the potential to alter a number of traditional

preconceptions relating to addresses and their value, including

challenging the concept that addresses are not in and of

themselves assets and addresses do no in and of themselves have

monetary value outside of the narrow constraints of use in

networks for routing and end point identification. Changing these

common percpetions about addresses and their use opens up the

potential for a number of responses, including:

- The loss of strong aggregation capability in the address space,

with the consequent load being imposed on the routing system.

- The significant shift away from a universal need-based address

allocation model in the underlying policy framework.

- The treatment of addresses as property with the associated legal

ramifications in terms of corporate and contract law.

- The imposition of taxes on addresses and their movement.

- The potential for unfairness and inequities to be realized in

terms of access to addresses for use by network service

providers.

Response:

A number of factors mitigate the risks above:

- As the transition to IPv6 gathers pace, any residual value

of IPv4 addresses would fall in line with the decreasing

value proposition of IPv4-based services in an increasing

IPv6 network.

- If this policy were to be adopted while IPv4 addresses are

still available from APNIC, APNIC's established IPv4 address

allocation process would continue to provide an alternative

source of supply of IPv4 addresses to the industry.

5.2.2
 Proposal diverts attention from
address reclamation and resuse

It has been argued that the proposal diverts attention from policy

development that encourages IP address reclamation and reuse.

Response:

To date the level of return and reclamation of addresses has

been minimal. Aside from price-based mechanisms it is unclear

that further policy refinement would alter this situation.

Even if policy development encouraged address reclamation and

reuse, there is the distinct possibility that the amount

reclaimed addresses would be smaller than the amount needed

for APNIC to continue to allocate addresses on a needs-basis

after the unallocated address pool has been exhausted.

An open and significant issue is how APNIC could fairly ration

limited addresses when faced with a much larger set of

demands. In other words, concentrating on relamation and reuse

policies rather than transfer policies also contains

significant issues that may prove challenging to resolve as a

policy matter.

5.2.3
 Potential for APNIC to be cast as a
regulator

If APNIC adopted this policy, APNIC may be cast as a regulator

of a secondary market in addresses. Concerns have been expressed

that APNIC has no experience, expertise nor the authority to

enforce regulatory actions. Such a role may also expose APNIC to

additional litigation.

Response:

This proposal does not advocate such a role for APNIC. The

scope of this policy is explicitly limited to the conditions

that would allow APNIC to recognise and record a transfer of

addresses in its registry.

There is a general belief that adoption of this policy would

act as an incentive for a market in addresses. However, that

does not imply that markets would act outside existing

regulatory structures.  Nor does it mean that market

participants would be immune from existing regulatory measures

within their respective regimes.

The potential for additional liabilities associated with this

policy should be the subject of legal review by an

appropriately qualified party.

5.3
Summary of comments on transfer proposals

There
are a number of views of this that have been noted in the various policy
discussions on this topic in the various RIR policy forums. The APNIC policy
proposal is broadly similar to a policy proposal under consideration in RIPE,
which is referred to here as a "minimal' policy for address transfers. The
address transfer proposal currently under consideration in ARIN has a larger
set of constraints to be applied to determine if a transfer would be recognised
by the registry. A summary of the discussion of the differences in these policy
proposals follows.

5.3.1
In favor of a 'minimal' policy

- The policy places APNIC in the role of a 'title office' for

addresses, and ensures that APNIC, as a registry operator, is

neutral in terms of the means used by APNIC members to determine

that they wish to proceed with a transfer of addresses.  As long

as the criteria for a valid transfer are met, by whatever means

agreed to by the parties involved, then the registry should

allow the transaction to be duly recorded.

- APNIC has no practical operational experience in the area of

enforcing various constraints on parties as to how and why

addresses may be transferred, and does not currently have any

recognized authority to do so.  Making policy in the absence of

a well understood and commonly accepted authority model calls

into question the legitimacy and authority of outcome.

- Regulation is a well understood and familiar concept in many, if

not all, regimes. If there is a general desire to place

constraint and regulate the actions of parties who wish to

undertake a transfer of addresses, then it may be preferred to

do so in the context of a broader framework that involves other

bodies and authorities that have a greater level of experience

and authority in this area of activity, and leverage from

existing regulatory structures and enforcement mechanisms. In

this manner the policy proposal does not attempt to create a

novel, and potentially superfluous additional regulatory

framework.

- APNIC has no experience in determining what actions by potential

parties to a transfer may need to be constrained in some

fashion. Attempting to create policy in anticipation of the need

for such constraints is going to be a guessing game that has

accompanying flaws, Irrespective of what constraints are

initially specified in policy, it will be the case that as the

levels of experience in this form of activity increases some

iterations over the policy of constraints will be necessary in

any case. This approach argues to start from a position that is

relatively open and unrestricted, and recommend that APNIC

impose additional constraints only when all other forms of

constraint are inapplicable and there is a clear need and common

desire for such constraints to be enforced by APNIC as distinct

from using another party for such a role.

5.3.2
In favour of applying a greater level on constraint in the policy

- APNIC has no practical operational experience in address

transfers, so we should take incremental steps form the current

position rather than a complete relaxation of the entire set of

constraints associated with the existing allocation

framework. Recipients of a transfer should be qualified by the

registry on the basis of demonstrated need in the same fashion

as recipient of address allocations today. Address blocks should

not be arbitrarily fragmented. Timing constraints should be

applied to stop transfers of addresses occurring that are

primarily motivated by reasons other than immediate need for use

in deployed networks.

- Constraints that are generally considered to be onerous and

unnecessary can always be removed at a later date, while

applying and enforcing additional constraints at a later date

will prove to be a far harder task.

- There are a number of technical risks associated with address

trading. Unconstrained deaggregation will lead to a fracture of

the routing system due to unconstrained and large scale

expansion of the inter-domain routing table. This is an

irreversible state.

5.3.3 
Discussions of the emergence of a market

The various comments made on this and the related address

transfer policy proposals provides grounds for the observation

that there is a general perception that the recognition of

address transfers leads to a de facto recognition of the

emergence of a market or markets for IPv4 addresses. A related

topic of discussion about the merits or otherwise of these

proposals has been the consideration of the relative merits and

risks of market behaviours when applied to this situation.

The comments opposed to the emergence of markets include the

following:

- Markets in addresses are an inevitable consequence of a

transfer policy, and unconstrained markets are prone to a

number of risks of distortion. These risks include deceptive

trading, margin trading, trading in market derivatives and

futures, hoarding, and speculation. The utility of an address

as a token for addressing a packet is devalued in a market

situation.

- Operation of a market will lock out all but the largest of

    players in the network from access to further
addresses, as the

value of the address will be set by the bidder with the highest

price and the ability to exploit the address to its maximal

extent.

- The operation of a market in IPv4 addresses will lead to the

erosion of the effectiveness of self-imposed policies in IPv6,

and may lead to the emergence of a market in IPv6 addresses.

- Markets are unfair in terms of the implicit bias of a market in

favour of those parties who are in a position to set the market

price, and inherently discriminating against those parties who

do not have the capacity to pay. In an international context

this is counter to the general objective of a generally

available, neutral and non-discriminatory communications

infrastructure.

Comments in favour of the emergence of a market in IPv4 addresses

include:

- Address exhaustion poses an insoluble problem to the address

registries in that for as long as there is a continuing demand

for addresses the registries have no means to meet that demand.

Markets create a means for addresses to be recycled, and create

a means for the various levels of demand and supply of

addresses in IPv4 to reach a balance through a market-based

pricing mechanism.

- At every stage there is always an alternative to bidding for

IPv4 addresses in the context of a market transaction: namely

the use of IPv6 within the network, and the use of an upstream

protocol translation service to provide legacy access to other

IPv4 networks. Given that substitutes exist, the potential

price of IPv4 addresses in a market is capped by the cost of

deployment of IPv6 and IPv4 transitional mechanisms.

- This is a temporary measure during the dual stack phase of
IPv6

transition. The higher the market price for IPv4 addresses the

greater the cost pressure placed on the industry to undertake

the IPv6 transition, which in turn limits the lifetime of the

market and the speculative potential of any such market.

Players will have an incentive to act quickly in terms of

releasing address resources into such a market given that

withholding for too long will result in no return as the market

will naturally terminate once IPv6 transition has reached a

critical deployment mass.

It should be noted that this address transfer policy proposal is

mute on the topic of a market for address transfers, and neither

      advocates nor specifically opposes the
emergence of any such

market or markets. The policy constrains itself to enumeration of

the set of constraints that would apply for APNIC to recognise

and register a transfer of addresses between APNIC members. How

those parties arrived at the decision to undertake the transfer,

and the related issues concerning property, financial and legal

frameworks and the emergence of markets, the need to regulate

such markets and identification of the market regulator are

specifically not encompassed by this policy proposal, nor does

this proposal advocate that such a role be undertaken by APNIC.

6.  
Effect on APNIC members
----------------------------

APNIC
members will have the ability to register the transfer of IPv4 address
resources between APNIC members.

7.  
Effect on NIRs
-------------------

This
policy does not encompass IPv4 address holdings administered by NIRs, nor the
transfer of resources where the source or recipient are NIR-serviced entities.

_______________________________________________
Sig-policy-chair
mailing list
Sig-policy-chair@apnic.net
http://mailman.apnic.net/mailman/listinfo/sig-policy-chair

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