Microsoft spends $7.5 million on IP addresses

It’s official, IP addresses are now more expensive than domain names.
Nortel Networks, the bankrupt networking hardware vendor, has sold 666,624 IPv4 addresses to Microsoft for $7.5 million, according to Delaware bankruptcy court documents (pdf).
That’s $11.25 per address, more than you’d expect to pay for a .com domain name. Remember, there’s no intellectual property or traffic associated with these addresses – they’re just routing numbers.
This, I believe, is the first publicly disclosed sale of an IP address block since ICANN officially announced the depletion of IANA’s free pool of IPv4 blocks last month.
The deal came as part of Nortel’s liquidation under US bankruptcy law, which has been going on since 2009. According to a court filing:

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.

Nortel contacted 80 companies about the sale a year ago, talked to 14 potential purchasers, and eventually received four bids for the full block and three bids for part of the portfolio.
Microsoft’s bid was the highest.
The Regional Internet Registries, which allocate IP addresses, do not typically view IP as an asset that can be bought and sold. There are processes being developed for assignees to return unused IPv4 to the free pool, for the good of the internet community.
But this kind of “black market” – or “gray market” – for IP addresses has been anticipated for some time. IPv4 is now scarce, there are costs and risks associated with upgrading to IPv6, and the two protocols are expected to co-exist for years or decades to come.
In fact, during ICANN’s press conference announcing the emptying of the IPv4 pool last month, the only question I asked was: “What is the likelihood of an IPv4 black market emerging?”.
In reply, Raul Echeberria, chair of ICANN’s Number Resource Organization, acknowledged the possibility, but played down its importance:

There is of course the possibility of IPv4 addresses being traded outside of the system, but I am very confident it will be a very small amount of IPv4 addresses compared to those transferred within the system. But it is of course a possibility this black market will exist, I’m not sure that it will be an important one. If the internet community moves to IPv6 adoption, the value of the IPv4 addresses will decrease in the future.

I doubt we’ll hear about many of these sales in future, unless they come about due to proceedings such as Nortel’s bankruptcy sale, but I’m also confident they will happen.
The total value of the entire IPv4 address space, if the price Microsoft is willing to pay is a good guide, is approximately $48.3 billion.

IPv4 addresses to run out Thursday

ICANN will announce the final depletion of its pool of IPv4 addresses this Thursday.
The Number Resource Organization will hold a “ceremony and press conference to make a significant announcement and to discuss the global transition to the next generation of Internet addresses”.
The NRO is ICANN’s supporting organization representing Regional Internet Registries, the outfits responsible for handing out IP addresses to network operators.
ICANN, the Internet Society and the Internet Architecture Board will also participate in the event, scheduled for Thursday February 3 at 1430 UTC. It will be webcast here.
Today, APNIC, the Asia-Pacific RIR, said that it has been assigned two /8 blocks of addresses, meaning IANA is down to its Final Five chunks.
Thursday’s ceremony will presumably entail ICANN/IANA officially handing out these last five blocks to the five RIRs, one each, as called for by its allocation policy.
After that, it’s all gone. No more IPv4. The age of IPv6 is upon us.
It is currently estimated that the RIRs will themselves run out of IPv4 in September. After that, if they need IP addresses they’ll receive IPv6.
IPv4 is rapidly becoming a scarce commodity.
Many people, including ICANN chairman Peter Dengate Thrush, have predicted a “gray market” for addresses to appear, with address blocks changing hands for less than the cost of upgrading to IPv6.
The focus on Thursday, however, will be all about the measures network operators need to implement in order to remain viable on an internet increasingly running IPv6 equipment.

IPv4 depletion “imminent”

The pool of IPv4 address space available to regional internet registries will likely expire in “early 2011”, according to the Number Resource Organization.
ICANN/IANA said today that it has allocated two more /8 blocks of IPv4, approximately 33.5 million addresses, to APNIC, the Asia-Pacific RIR.
This means there are only 12 /8 blocks left, about 5% of the total allowable addresses under IPv4.
Under IANA’s rules, the final five /8s will all be allocated at the same time, one to each of the five RIRs. So there are only seven left to be handed out under the normal process.
The NRO followed up ICANN’s blog post with a press release stressing the importance of adopting IPv6. From the release (my emphasis):

“This is a major milestone in the life of the Internet, and means that allocation of the last blocks of IPv4 to the RIRs is imminent,” states Axel Pawlik, Chairman of the Number Resource Organization (NRO), the official representative of the five RIRs. “It is critical that all Internet stakeholders take definitive action now to ensure the timely adoption of IPv6.”
…
According to current depletion rates, the last five IPv4 address blocks will be allocated to the RIRs in early 2011. The pressure to adopt IPv6 is mounting. Many worry that without adequate preparation and action, there will be a chaotic scramble for IPv6, which could increase Internet costs and threaten the stability and security of the global network.

There’s a danger that things could start getting messy over the next couple of years, as the RIRs themselves start running out of IPv4 and network managers worldwide start discovering their IPv6 capabilities are not up to scratch.