Is ARIN’s need justification an undesirable meddling by ARIN in private (and otherwise lawful) commercial arrangements between private parties?
A company that buys IPv4 number blocks from a seller in a private transaction must obtain ARIN’s approval to register the numbers in ARIN’s registry database. ARIN’s approval requires the buyer to prove that it will use all of the numbers within 24 months.
Whether application of ARIN's needs based registration policies to private IPv4 market transactions is undesirable meddling or a necessary check on the market to prevent undesirable market distortions has been debated in the North American Internet community for several years. With ARIN’s depletion, the debate has intensified.
The ARIN (American Registry for Internet Numbers) community debates and develops policy proposals using, in part, mailing lists and in-person policy meetings. ARIN’s public policy mailing list (the PPML) is open to anyone that subscribes. On the PPML and during ARIN’s October 2014 policy meeting in Baltimore, several policies seeking to remove or weaken needs justification were discussed.
Many of ARIN’s most vocal participants strenuously object to removing ARIN’s traditional needs based. These traditionalists argue that needs justification for transfers prevents hoarding and speculation. They conclude that speculators or deep-pocketed hoarders will artificially reduce supply, and inflate prices --- making it unnecessarily difficult and expensive for honest network operators to obtain the numbers they need to conduct their business and help grow the Internet.
Hoarding and speculation avoidance are puzzling rationales. There is no evidence that needs justification in the IPv4 market actually prevents hoarding. And supply-impacting IPv4 market speculation is a fun thought experiment but not a real problem. Flipping IPv4 addresses is too risky and the future price curve sufficiently uncertain to consider pure speculation as anything other than an edge case that should be ignored when shaping sensible efficient-market policies.
A deeper look at the current market and actual behavior of market participants reveals why many companies, and their representatives in the ARIN community, may want to keep needs justification.
ARIN’s needs justification process imposes significant perceived barriers for entities that are not accustomed to working with ARIN’s policies. This perceived barrier tilts the playing field in favor of experienced members of the ARIN community – who are better able to match their acquisition purchase size to the quantity of IP addresses ARIN will approve. Furthermore, limiting registration to network operators and vesting ARIN with the power to withhold registry updates for purchasers that fail to justify their need frustrates traditional asset acquisition financing mechanisms. Few, if any, commercial banks will provide acquisition financing in this climate.
Maintaining transfer rules that are both opaque and even daunting to ARIN “outsiders,” weakens market activity and provides downward pricing pressure. A “win” for the traditionalist perhaps but at what cost to the Internet community as a whole?