Market for IPv4 Internet addresses set to explode

As regional Internet registries (RIRs) announce the exhaustion of IP version 4 (IPv4) addresses, a fledgling market for addresses is starting to take shape.

As Internet users finally realise the limitations of IPv4's address space, the hard work for RIRs is actually coming to an end. For years the five RIRs that service the globe have been banging on about the need to migrate to IP version 6 (IPv6) but with no more IPv4 addresses left, the educational message will turn into one of necessity. But whereas ignorance got the Internet to this point, cold hard cash is being exchanged to keep IPv4 alive among a rich club.

Last month Microsoft paid in the region of $75 million for 666,624 IPv4 addresses from bankrupt network firm Nortel. Microsoft isn't the first company or person to pay for IPv4 addresses but its decision to buy so many at a time when everyone knows IPv4 is on its way out, puts into sharp focus how companies believe that IPv6 deployment isn't ready to take the strain.

Then came the announcement last week from APNIC, the RIR for the Asia-Pacific region, that it has reached the final /8 of the IPv4 addresses the Internet Assigned Numbers Authority handed it following February's announcement that the IPv4 endgame was finally under way. That announcement had a generality that masked the urgency of its underlying message but now that APNIC, the fastest growing RIR, has announced it is on "stage three", the final stage, of its IPv4 depletion plan, there really is no turning back.

For APNIC, if stage one was the man who called out when he spotted the iceberg, then stage three would be Leonardo and Kate hanging off the back watching the ship go down. In 'slash notation' a /8 doesn't quite mean APNIC's cupboard is bare, it still has over 16 million addresses but that hasn't stopped APNIC putting severe allocation restrictions. The largest single allocation APNIC will give out is a /22 or 1,024 addresses, but only to those who can show they have IP version 6 (IPv6) addresses.

APNIC's restrictions won't even act as a plaster on the broken leg as Axel Pawlik managing director of RIPE NCC the RIR that services Europe, candidly told thinq_, "APNIC will run out [of addresses] any time now". Pawlik wasn't indulging in Schadenfreude because he knows the same thing will happen to RIPE, saying that he expects RIPE to announce something similar in the next two months and run out completely in the second half of 2011.

Axel Pawlick

For the moment Pawlik and RIPE will have to get in line because it is looking like ARIN, the RIR that services US and Canada, will be next to announce that it is down to the final batch of IPv4 addresses. And like any commodity as IPv4 addresses become scarce, its value increases.

So does Microsoft's decision to pay $11.25 for an IPv4 address that should be available for nothing undermine RIRs's job of allocating addresses based on justifiable demand? Not so according to Pawlik, who says RIPE "doesn't care about incentives such as money changing hands" adding that money changing hands is "none of my [RIPE's] business". Pawlik also confirmed that paying for IP addresses wasn't against RIPE's rules.

Pawlik's main concern is that RIPE's records are kept accurate, saying he wants to make sure "the threshold for transfers is low" to ensure such transactions happen in a public manner. The nightmare for Pawlik is that IP ranges change hands without any notification to RIRs and the ownership details are incorrect in the whois database. RIR databases are important not just for ownership data but to find out contact details for abuse complaints, information on autonomous numbers, routing policies and reverse DNS delegations.

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RIPE's intention to stay well clear of a fledgling market in IPv4 is partly due to the organisation not wanting to step on any of its members' toes.

Pawlik admitted that RIPE was "skirting the issue because it was not trying to compete with its members". Pawlik's view harks back to the organisation's desire that by making transfers as easy as possible, IP address transfers, whether they involve money or not, are reported to RIR.

Prior to RIRs being set up, the allocation of IPv4 addresses was a hotch-potch affair. It resulted in corporations getting vast swathes of the address space based on little more than their brand name. One example is HP, which thanks to its purchase of Digital Equipment Corporation, has over 32 million routable IPv4 addresses. At least HP offers technology services; companies such as pharmaceutical firms Eli Lily, Merck, universities such as MIT and even the UK's Department for Work and Pensions each have 16 million IPv4 addresses. Back in the 1980s and early 1990s the wastage of resources was akin to driving down the road in a Rolls Royce throwing £50 notes out of the window, but even without the careless allocation, the IPv4 pinch would have occurred sometime in this decade.

While firms such as Microsoft may be purchasing IPv4 addresses, others are returning them back to RIRs for re-allocation. Pawlik says that there are occasions when RIPE gets back a /16, or 65,536 IPv4 addresses, but added that even with re-allocation, the date of IPv4 address exhaustion is only put back by "a week or maybe a month".

While APNIC, RIPE and ARIN get ready to announce IPv4 exhaustion, there's one RIR that has a few more addresses left in its book than its peers. AFRINIC, Africa's RIR, is depleting its allocation of IPv4 addresses at a slower rate and Pawlik claims it should last well into 2012. So, while the rest of the globe runs out of IPv4 addresses, AFRINIC could well be holding the Internet's most precious commodity.

There's not much stopping large companies applying to AFRINIC for IPv4 addresses when their local RIR has run dry. Pawlik says that those applying to AFRINIC will have to be based in the region it serves, but adds that there's nothing stopping firms having offices in Africa, which would qualify them for IPv4 addresses from AFRINIC.

Microsoft set the price of an IPv4 address at $11.25 in March 2011. It is quite likely that by the end of 2011 that will have increased and - what's more - firms that have ample IPv4 addresses or cash to purchase them can bully smaller outfits that simply cannot compete in IPv4 auctions. While the world ponders about the effects of net neutrality, something similar could happen with small businesses forced onto IPv6 with larger companies withholding support to maintain the value of their investment.

Some in the networking community attributed the slow adoption of IPv6 to little financial incentive, but the market for IPv4 addresses could be just the tonic. With the RIRs not willing to stand in the way of free market economics, the cost of maintaining an IPv4 network may finally hit the point where IPv6 doesn't just offer technological benefits but cost benefits too.

A few years ago, a few seemingly fanciful network engineers said that IPv4 addresses would never run out, basing that statement on premise that the last IPv4 address would cost an inordinate amount of cash. At the time it seemed a statement fuelled by beer rather than brains, but just like the Internet itself, fanciful thinking has a habit of turning into reality.