Microsoft pays $7.5m for IPv4 addresses

Microsoft has bought a block of IP addresses at a cost of $11.25 each - more than the price of an average .com domain name - in the first sign of panic buying as IPv4 addresses run out.

The software giant paid a whopping $7.5 million for the block of 666,624 IPv4 addresses, which was being sold as due to the bankruptcy of US-based network hardware vendor Nortel Networks.

IP addresses are used to uniquely identify every device on the Internet. The IP address of this website, for instance, is 109.74.195.128.

Unlike domain names, no single IP number is more memorable or important than any other - so individual IP addresses shouldn't possess any intrinsic value.

But the Nortel sale could be the first sign of a burgeoning 'grey market' as the supply of IPv4 addresses runs out, before they can be replaced by the newer IPv6 protocol.

Created in 1981, the IPv4 protocol uses a 32-bit addressing system to provide a total of 4.5 billion unique addresses - an unthinkably large number at the time. But thanks to an explosion in the range of devices that access the Internet, and the popularity of mobile computing, that pool of IPv4 addresses is now perilously close to running out.

As thinq_ reported in February, the last block of IPv4 addresses has now been allocated. Until the IPv6 protocol is implemented, the Internet is now, effectively, full.

IPv6 uses a 128-bit addressing system to offer 34 undecillion (that's 3.4×10^38) addresses - more than enough to keep us going. But switching over to IPv6 could be a slow process, as it requires network operators to replace a great deal of their infrastructure.

Regional Internet Registries - the bodies that allocate IP addresses - are negotiating a system that will enable unused IP addresses to be returned to the pool for re-allocation. But in the mean time, anyone who wants to grab themselves a bunch of IP addresses may have to resort to the 'grey market' - and, it seems, they may have a bidding war on their hands.

According to a court filing from the Nortel bankruptcy:

"Because of the limited supply of IPv4 addresses, there is currently an opportunity to realize value from marketing the Internet Numbers, which opportunity will diminish over time as IPv6 addresses are more widely adopted."

Microsoft's was the highest of four bids for Nortel's full IP allocation, which also attracted three bids for part of the block.

Based on the price that Microsoft paid, the value of the existing IPv4 space would be a massive $43.8 billion.