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IP Addressing in the New Age of Scarcity

(This is the prepared opening statement given on behalf of Depository, Inc. at the panel discussion "IP addressing in the new age of scarcity" in the context of Internet governance and public policy at the Global Internet Governance: Research and Public Policy Challenges for the Next Decade Regional Conference held at the American University School of International Service on Thursday, May 5th, 2011 between 11:00 a.m. to 12:15 p.m. with Prof. Milton Mueller moderating and on the panel as well was John Curran, President and CEO of ARIN and Michael Froomkin, Professor of Law, University of Miami School of Law.)

My name is Peter Thimmesch and I am the Chairman of Depository, Inc., the 1st global IP address registrar.

First, I would like to thank Professor Mueller for inviting me to participate here today. In keeping with the guidance we received about this particular panel I will use my few minutes to present our perspective on three aspects of Internet Governance; law, technology, and business.

First — Scarcity ... depletion ... exhaustion

"IPv4 numbers are scarce"

"We have depleted the pool of numbers"

"IPv4 exhaustion counter!"

Well, IP numbers aren't scarce. There is today precisely the same quantity of IPv4 numbers as were created at the birth of the protocol: 4,294,967,296

What is scarce is the number, the quantity of unallocated IPv4 numbers. But the almost 4.3 billion numbers are still out there. The question should be is: How many are being used? And if they are not being used, how best to reallocate them for usage. This compels all of us to re-examine our positions and rethink some long held beliefs.

Our company is about services to the existing Number Block Holders. To be clear, these services do not include the allocation of number blocks and never will. Our company performs post-allocation services associated with number blocks (Directory maintenance, Routing facilitation, Reverse look-up, Sub-delegation tracking, and Transfer services, to name but a few). We strongly believe, and suggest to you that allocation and post-allocation services should, and indeed must, be separated.

The comingling of allocation and post-allocation services in a single services contract creates an unnatural inversion of the relationship between the service provider (the Regional Internet Registries) and the service recipient (Internet Service Providers). Comingling puts the service recipient in a subservient role to the provider. It allows the service provider to unilaterally dictate, in perpetuity, the cost, terms and conditions of the service they provide, the ability to change any or all of those contract provisions at any time, and leaves the service recipient no choice: agree or surrender the asset. Try to find another service industry where this is the case. I submit that it's only possible if there are no competing service providers (i.e. the provider is a monopoly) and the service provider claims the "right" to revoke the allocation of the number block.

Post-allocation services are essential services, not only to the service recipient but also to the safety and stability of the Internet. There is, however, no necessary natural monopoly in providing these services. Until Depository was started, there were only artificially-created regional monopoly providers, which have formed what might best be characterized as a global cartel. Understandably, in the name of "stewardship", they individually and collectively fight hard to preserve their monopoly positions. Post-allocation services are, and should be, just that, services ... offered by competing qualified service providers. Block holders should have the ability to select their service provider based upon their individual evaluation of capability and value provided.

If that wasn't controversial enough let me now turn to the legal environment:

The fundamental rethinking which recently occurred was in the realm of exclusive rights. There are numerous organizations and entities, some of which are present here today, which have long argued that IPv4 numbers aren't property. These organizations have now accepted that holders of IPv4 number blocks have rights and those rights are the property of the holder. That acceptance is recorded in US Federal Court pleadings so we know it to be a fact and not subject to debate. Stated differently, and in terms which are more commonly used within the business community, the newly accepted reality is that the rights to a number block are an asset of the number block holder. These rights would be: the exclusive right to use, the exclusive right to transfer and the exclusive right to sell. This is, we submit, a fundamental change in their position. The consequence? No longer can IPv4 number blocks be conveniently termed "community resources". They are "an asset of the block holder" which may be, and in fact now are, exchanged for consideration. The feared "black market" or "grey market", which has quietly existed for some time, now is a thing of the past.

A legitimate market, properly conducted within the rule of law, with respect for these rights, exists and is the reality that all have accepted.

Regarding technology:

Here the rethinking which must occur centers around a long-held position that: if IPv4 number blocks are property, and therefore can be traded in an open market, there will be an explosion in routing tables. Routers will be overloaded. The stability and security of the Internet would be threaten. Well, the foundation for this particular house of cards is based upon the unfounded premise that open-market trading, and ownership of number blocks will cause disaggregation of routing. Classic fear, uncertainty and doubt. Disaggregation is not a natural consequence of ownership or trading.

Yet the fact is that routing technology has evolved. The present generation of routers has orders of magnitude more capability than those which existed at the time of RFC-2008's creation in 1996 which is the sole reason for the concern. The present generation of routers can easily accommodate a great deal of route disaggregation, which to date has not occurred, without adverse impact on the stability or performance of the network. Moreover, even the most pessimistic amongst us would have to accept that the technology which underpins routing in the Internet will continue to positively evolve in the future.

Lastly, business:

Here the rethinking which must occur, motivated by the new realities around us, has to do with the creation of wealth. There was a time when it was argued that the transport layer of the Internet must never be commercialized. That, in so doing, would unfairly create wealth for the early providers and somehow be bad for the Internet. Today, the ISP industry is valued in the billions of dollars. Who today would argue that commercialization of the transport services was bad for the Internet? Those collective 10's of billions of dollars generated by commercializing transport services fund the development of innumerable new services, expand and enrich the Internet for all participants, create jobs and generate further innovation. One has just to look at the remarkable and vast emerging services from the commercial Internet services marketplace versus the poorly capitalized Internet2 consortium for how that turned out.

This new numbers registration services industry, with competing legal, technical and service providers, will create great wealth where there was none before. Wealth which will fund the development of new and better services. This industry has a strong financial interest in the stability of Internet operations and should or will provide greater accountability through tighter, more accurate, contractually specified recording of the true identity of the number block holder. This is not something to be feared. It is something to be embraced if not celebrated.

Thank you.

By Peter Thimmesch, Chairman & CEO at Addrex, Inc.
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