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Brokers set up shop to trade IPv4 addresses; policymakers clarify trading rules

A vibrant market for buying and selling IPv4 addresses is emerging, and policymakers are clarifying the rules associated with how network operators can monetize this precious Internet addressing resource.

At least four websites -- www.depository.net, www.denuo.com, www.addrex.net and www.tradeipv4.com -- are serving as brokers for organizations that want to sell or lease IPv4 address space.

Martin von Loewis, a German entrepreneur, launched the www.tradeipv4.com website on April 15, immediately following the Asian regional registry's announcement that it was out of its regular pool of IPv4 addresses. The website is a trading platform for sellers of IPv4 address space to solicit bids from buyers, with von Loewis functioning as the broker for sales. He hasn't brokered any sales yet.

"I do see a market for IPv4 addresses emerging ... but people are somewhat hesitant to use the service because many believe it's illegal or black market or gray market,'' von Loewis says. "That actually affects the sellers more than the buyers."

The IPv4 address space resale market is evolving in light of Nortel's recent sale of 666,624 IPv4 addresses to Microsoft for $7.5 million, or $11.25 per address.

BY THE NUMBERS: Microsoft pays Nortel $7.5 million for IPv4 addresses

"Microsoft's acquisition of Nortel's IPv4 address space: That's a fascinating milestone,'' says Craig Labovitz, chief scientist at Arbor Networks, which studies Internet traffic trends. "Now there's a price on [IPv4 addresses]. It's really the beginning of an economic incentive to support IPv6 over IPv4."

The IPv4 resale market is evolving because the Internet is running out of IPv4 address space.

IPv4 uses 32-bit addresses and can support 4.3 billion devices connected directly to the Internet. IPv6, on the other hand, uses 128-bit addresses and supports a virtually unlimited number of devices -- 2 to the 128th power.

The free pool of unassigned IPv4 addresses was depleted in February, and the Asia Pacific regional Internet registry announced last week that it has doled out all but its last 16.7 million IPv4 addresses which are being held in reserve for startup network operators.

BACKGROUND: Asia out of IPv4 addresses

Von Loewis anticipates that most of his initial customers will come from Asia. "I expect people will only use this service in regions where IPv4 is already exhausted," von Loewis says. "If they can get addresses free from RIPE [the European registry, which still has IPv4 addresses], why buy them?"

Von Loewis says he has been contacted by a number of potential buyers. He has established a minimum block of 256 IPv4 addresses -- known as a /24 -- for his trading site. He expects most of the sales on his site will be for blocks of address space ranging from 256 addresses to 4,000 addresses, which is known as a /20.

"People do want to buy the larger blocks of addresses and they are not sure yet on how to do it," von Loewis says. "The policies are evolving all the time ... It's somewhat complicated."

The rules of how IPv4 addresses can be sold are still being clarified.

Microsoft agreed last week to transfer these IPv4 addresses using policies established by the American Registry for Internet Numbers (ARIN), one of five Regional Internet Registries that dole out IPv4 and next-generation IPv6 address space to ISPs, enterprises and other network operators.

ARIN says it has authority to approve all sales and other transfers for IPv4 address space -- even legacy address space given out prior to ARIN's founding in 1997-- in the United States, Canada and parts of the Caribbean.

ARIN's policy for overseeing IPv4 address sales is this in a nutshell: In order for an organization to sell IPv4 addresses, it has to prove to ARIN that the addresses are registered to that organization. The buyer has to prove that it is a valid recipient of the IPv4 address space, including demonstrating that it has the need to use up the addresses over the next 12 months.

"Whether we're talking about a transfer or a sale, at the end of the day these get transferred as updates to the entries in ARIN's registry database," says ARIN President and CEO John Curran. "Transfers occur after we receive a request and approve it."

ARIN is encouraging the nascent market for IPv4 address trading.

"Our job is to make sure there is good utilization of address space," Curran says. "If there's a market for IPv4 addresses, people who have some unused addresses and might have to work to get it freed up will have an incentive to do so. That means the address space will be better utilized."

Curran says ARIN has seen a modest increase in IPv4 address transfer activity in the last few months, as IPv4 depletion has become a more urgent issue.

Curran says he anticipates "there will be dozens of organizations that will try to match people with addresses with those who need addresses. ... The more organizations that help people find address space, the better. It doesn't do us any good to all be running out of address space and have some idle."

ARIN adopted this IPv4 address transfer policy 18 months ago because it was worried about the development of a black market for IPv4 addresses. But ARIN's transfer process is so new that "it's really a murky area," Arbor Networks' Labovitz says.

DETAILS: The 6 biggest misconceptions about IPv6

In the meantime, ARIN is still handing out IPv4 addresses from its stash of 85.8 million remaining addresses. ARIN estimates it has a six- to nine-month supply of IPv4 addresses, which are being given out to ISPs to meet the need they can demonstrate three months into the future.

"We're still giving out address space in the region," Curran says. "As we continue to issue address space, there may not be a lot of reason for someone to do a transfer."

One issue is whether a vibrant IPv4 address resale market will further delay IPv6 deployment.

A new study of Internet traffic trends by Arbor Networks indicates that around 0.03% of Internet traffic is IPv6, down 12% during the last six months. In contrast, IPv4 traffic grew by an average of 40% to 60% over the same time frame. The study involved measuring IPv6 traffic across six ISPs in North America and Europe over the last six months.

"The amount of IPv6 traffic -- both tunneled and native -- is very, very small. It's well under three-tenths of 1%,'' Labovitz says. "We're at a place in the Internet's 20-year evolution where we're starting to see the end of IPv4, and it's clear that we've got a very long way to go with IPv6 migration."

Proponents of IPv6 are hoping that the upcoming World IPv6 Day, a 24-hour trial of IPv6 that is scheduled for June 8, will speed up IPv6 adoption and in turn prime the market for IPv4 address resale.

Arbor Networks says it isn't sure how much more IPv6 traffic will surge across the Internet on June 8. "We expect it to jump significantly," Labovitz says. "It's really a question of how many folks are running modern stacks and how many folks have access to IPv6 over the infrastructure. I don't think it will be half of Internet traffic on June 8, but whether it goes up by 2% or 5%, I don't know."

Arbor is putting in place a measurement capability so that it can provide near real-time reports on IPv6 traffic on World IPv6 Day.

"We want to have hour-by-hour snapshots of the success or failure of the event," Labovitz says. "We'll put up a Web page beforehand with counters that show the percentage of traffic, the number of carriers with native IPv6 traffic and a lot of other vital statistics."

But Labovitz admits that IPv6 still faces many hurdles to deployment.

"Vendors haven't wanted to do it until the carriers demanded it. Carriers haven't wanted to do it until the enterprises demanded it. Consumers don't want to do it until there is content, and the content providers are waiting on the carriers," Labovitz says. "That's why World IPv6 Day is so important, because it isn't just about the carriers; it's about the whole Internet ecosystem."

Learn more about this topic

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