Procuring IPv4 Addresses: Wait in Line, Buy, or Lease

The explosive growth of the Internet, digital transformation, and the use of mobile devices created a great demand for addresses. And even though there were more than four billion possible IPv4 addresses, the supply ran out. Organizations that need additional IPv4 addresses for new projects or expansion must either wait for allocated addresses to be freed up, bid on blocks of IPv4 addresses on global marketplaces, or lease the addresses from other organizations.

To put the issue into perspective, consider that the American Registry for Internet Numbers (ARIN) free pool of IPv4 addresses was depleted in 2015. The situation is comparable in other countries and regions of the world. The organizations that administer the assignment of addresses have similarly run out of IPv4 addresses.

Why? IPv4 uses 32-bit addresses. Each bit can be 0 or 1, so there are theoretically 2³² (more than four billion) total addresses possible. (In contrast, IPv6 uses a 128-bit address, which equates to 340 trillion trillion trillions of possible IP addresses.)

To put the IPv4 address number into perspective, there are almost 8 billion people populating the planet. So, there are more people than IPv4 addresses. Certainly, there are large parts of the earth where people are offline and do not use IP addresses. But considering that today, most devices (appliances, electronic equipment, computers, smartphones, tablets, and more) have an IP address, it is easy to see why there is a shortage.

Where to turn for IPv4 addresses

Most small to medium businesses get their IPv4 allocation from their service provider and do not require any direct allocation. The cost of their IPv4 is bundled into their service contract, and it will meet their needs for the foreseeable future.

But what about large enterprises, service providers, or other organizations that need large blocks of IP addresses?

IPv6

One obvious way to get around the IPv4 address availability problem is to move to IPv6. Besides many more available IP addresses, IPv6 offers several benefits over IPv4, including more efficient routing, more efficient packet processing, security, support for new services, and more.   

However, for many organizations, the transition to IPv6 is in the future. When they need IP addresses now, IPv6 is not in the cards (pun intended). That’s the case even though IPv6 launched 9 years ago, and IPv4 ran out of addresses 6 years ago. The reasons why organizations are still staying with IPv4 vary greatly from organization to organization. Some common reasons include the cost of new infrastructure and the need to retain legacy applications that are not compatible/compliant.

As Asia Pacific Network Information Centre (APNIC) Chief Scientist Geoff Huston noted in an article last year, while IPv6 is approaching 30% of the Internet’s user base, what comes next is not certain. “The mainstream market typically needs to identify some opportunity in the technology, whether it’s cheaper, disruptive to incumbents, desired by consumer motivations, or similar market incentives to drive the next wave of investment in adopting this technology,” he said.

So, what are the IPv4 options?

Wait in line

ARIN has a waiting list for addresses. As the organization notes on its waiting list site: “As IPv4 addresses become available, typically through revocations due to non-payment, they will be used to fill requests on a first-approved basis, subject to the size of each available address block.”

Organizations needing addresses submit requests to ARIN. If an IPv4 waiting list request meets current policy requirements, the organization will be placed on the IPv4 Waiting List for their approved block size. The organization must specify the smallest block size they would be willing to accept to fulfill their request. As of late December 2021, 223 organizations are on the waiting list.

Buy IPv4 addresses

A common alternative is to buy addresses from organizations that received many addresses years ago when there was no consideration of available addresses being exhausted. Specifically, many larger enterprises, universities, and government agencies often received large IPv4 allocations years ago and still have many to spare. That is a potential source of IPv4 addresses.

For example, over the last four years, Amazon has bought 4 million IPv4 addresses from AMPRNet, 8 million from the Massachusetts Institute of Technology, and 16 million from General Electric.

Certainly, other companies can arrange such direct sales. But as is the case with many things that are in limited quantity and in great demand, IPv4 marketplaces have opened up.

An example of this approach in action is the auction site of IPv4.Global. A quick glance shows the price (per IPv4 address) has increased two to two-and-a-half fold in the last year. Recent sales of blocks of IPv4 addresses have averaged $50 or more. A company that needs 10,000 addresses (a modest amount in many cases) would have to spend half a million dollars in today's market.

Leasing

The case for leasing is simple.

A startup organization or one that needs to rapidly scale to meet growing business demands might need one million IP addresses. Today, that organization would have to pay about $50 million upfront for those addresses.

They might be able to lease that number of addresses for about $500,000 per year, according to Paulius Judickas, Head of Sales at IPXO, a company that, according to Crunchbase, came up with a monetization and leasing platform that allows businesses to share their allocated IP resources.

"In this way, they could generate revenue from their clients and start to grow their business,” says Judickas.

Leasing also appeals to the organizations holding the IP addresses. “If you are sitting on 2 million IP addresses, do you sell them now or wait for a higher price?” asks Judickas. In such a case, leasing gives such an organization the option to make some recurring revenue from the addresses while retaining them to sell at a later date in case the price per IP address continues on its roll.

As is the case with buying IPv4 addresses, organizations can negotiate their own leasing deals. What IPXO brings to the table is a platform that brings together the two parties (those with available addresses to lease and those who want to lease). The IP exchange transactions are automated and can be completed within 10 minutes.  

A final word

As demand for IP addresses grows, organizations have multiple choices. They can migrate to IPv6, which many organizations would rather hold off on. They can submit requests to IP address administrative organizations like ARIN, buy addresses directly from organizations, go through IPv4 sales marketplaces, or lease.