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An insider's guide to the private IPv4 market

Marc Lindsey, Janine Goodman | May 28, 2015
We've been hearing about the impending depletion of IPv4 addresses for years, but that day is finally upon us -- the free supply of IPv4 numbers in North America will be completely gone within a month or two.

ARIN's current registration transfer policy focuses on ensuring that the recipient satisfies certain requirements to prove how many numbers they will actually use in their IP networks over a 24-month period. This policy may successfully limit the size of IPv4 blocks registered by ARIN to a specific buyer in a single transfer request, but it does not actually limit the size of the IPv4 blocks that are traded between parties.

For example, a buyer could legitimately purchase options that lock up four years' worth of IPv4 supply, and then initiate two transfers — one 24 months after the other, all in compliance with ARIN's needs-based transfer policy.

Some buyers go further and bypass ARIN registration entirely, which allows them to consummate transactions without the size limits or other policy controls imposed by ARIN. These "grey market" participants employ alternative means, like long-term leasing without a formal registration transfer, to obtain control of the numbers they acquire.

In both cases, the result is the same: The registry continues to list the seller as the registrant of an IPv4 block even though the block has been sold (or optioned) to a third party, and the seller no longer has a contractual right to use the block.

As an additional unintended consequence, ARIN's restrictive transfer policies are encouraging some North American network operators to avoid transactions involving ARIN altogether. They acquire and then register their IPv4 blocks in a region where it is significantly easier to conduct IPv4 trades in the open.  

The burgeoning IPv4 broker industry is another artifact of the new market. There are only a few brokers offering services specifically to IPv4 market participants. This relatively discrete pool of participants will likely grow as the volume of IPv4 trades increases significantly over the next several years.

There are no meaningful barriers to entry for IPv4 brokers and there is no self-regulatory body to enforce minimal qualifications, experience or codes of conduct. Assessing the qualifications and ethics of prospective brokers, and managing the quality of their performance once engaged, is critical to success for market participants.  

Buyers and sellers are trading and transferring numbers notwithstanding the uncertainty and disorder that characterizes the current IPv4 market. Market participants must take important steps to minimize the risks and execute successful transactions.

1. Agree on an appropriate transaction framework in advance

Before participating in the marketplace, both buyers and sellers should understand the specific exclusive rights in IPv4 numbers that can be conveyed effectively, identify and assess the trade-offs of the available deal approaches, and select the approach that best fits their business objectives. For sellers, flexibility is important to attract buyers and enhance the value of their transactions.

 

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