ARIN-prop-326: Replace Specified Transfers with Monthly Single-Price Auction

Date: 26 October 2023

Proposal Originator: Kevin Wallace

Problem Statement:

IPv4 addresses are getting too expensive for small LIRs. Large cloud providers are amassing huge IPv4 allocations, letting the value of their hoard disincentivize them from offering first-class IPv6. Bad actors are fraudulently obtaining IP addresses and flipping them for profit, interfering with price discovery and wasting resources on investigation and litigation efforts. IP leasing has become a haven for spam and other forms of abuse. The current transfer market approach incentivizes speculation, hoarding, and fragmentation, rather than efficient allocation. Replacing it with a monthly single-price auction would reduce or eliminate the financial incentives underpinning these issues and provide a valuable revenue source to fund ARIN operations.

Policy Statement:

The NRPM is amended to implement the following policy:

LIRs may no longer transfer IPv4 addresses to specified recipients.

They may voluntarily return unneeded addresses to ARIN.

Every month, returned IPv4 addresses are allocated back to eligible LIRs based on the results of a single-price auction conducted by ARIN.

Auction revenue is split, x% to ARIN and (100-x)% to the returning organization as a non-refundable account credit.

ARIN can adjust the value of x over time to balance incentives to return IPs for supply stability, revenue needs, etc.

Auction participation is open to any LIR who needs addresses for justified operational use.

Reciprocity with other RIRs is maintained: non-ARIN LIRs may bid and transfer acquired addresses into their RIR, and ARIN LIRs may still obtain addresses out of region and move them into ARIN.

Specifically, the following changes are made.

(1) 4.1.8 is modified:

“a /22.” is replaced with “set forth in section 8.5.”

“Organizations which hold more than a /20 equivalent of IPv4 space in aggregate (exclusive of special use space received under section 4.4 or 4.10) are not eligible to apply.” is removed

“Qualified requesters will also be advised of the availability of the transfer mechanism in section 8.3 as an alternative mechanism to obtain IPv4 addresses.” is removed

(2) 4.1.8.2 is replaced with:

ARIN will fulfill requests on a monthly basis, excluding months in which there are no addresses to distribute. When the quantity of requested addresses exceeds the number of available addresses, distribution will be prioritized based on the results of an auction conducted by ARIN and open to waitlist requestors as well as non-ARIN LIRs who need addresses for operational use outside of the ARIN service region. Bidders may submit a positive per-IP bid; failure of a requestor to submit a bid shall be treated as an implicit bid of $0. After auction close, bids are chosen in order of highest price (breaking ties by earliest waitlist sequence) until every address has been matched to a bid. The lowest successful bidder may receive a partial allocation and remain on the waitlist for the remaining addresses; all other successful bidders will receive full allocations and be removed from the waitlist. All successful bidders pay the lowest winning bid. Auction revenue may be split, at ARIN’s discretion, between ARIN and the organization that returned the address space as a non-refundable account credit. Bids are for a quantity of addresses, rather than for a specific prefix, and ARIN may match bids to addresses in a way that aims to minimize overall fragmentation.

(3) 4.2.3.8 is modified:

“IP allocations issued through 4.2.3.8 are non-transferable via section 8.3 and section 8.4 for a period of 36 months.” is removed

(4) 8.3 is modified:

“IPv4 addresses {and,or}

ASNs” is replaced with “ASNs”

“Address resources from a reserved pool (including those designated in Section 4.4 and 4.10) are not eligible for transfer.” is removed

“The source entity will not be allowed to apply for IPv4 address space under Section 4.1.8. ARIN Waitlist for a period of 36 months following the transfer of IPv4 address resources to another party.” is removed

(5) 8.4 is modified:

“Conditions on source of transfer” is amended to include “For transfers of IPv4 addresses, the source entity must be outside of the ARIN region, or the transfer must be the result of a section 4.1.8.2 auction.”

(6) 8.5 is renamed:

“Specified Transfer” is replaced with “Specified Transfer and Waitlist Auction”

(7) 8.5.5.1 is modified:

“transfer the entire larger block” is replaced with “return or transfer the entire larger block”

(8) 8.6 is retired.

Timetable for Implementation: 1 year after adoption, to give ARIN time to ready auction procedures, and to provide a “last call” period for organizations to initiate final specified transfers under the old policy.

Comments: Follow-up to ACSP Suggestion 2023.14.