IPv4 endgame; following the money

by Maria on March 17, 2011

As part of its campaign to be able to buy and sell IPv4 addresses in the profitable end game of numbering availability, Depository Inc., a US company led by David H. Holtzman (formerly of NSI) has written to ICANN complaining about the US regional Internet registry, ARIN. Depository wants bulk access to ARIN’s IP Whois in order to ensure accuracy of its own records, and says it doesn’t intend to use the database for direct marketing. ARIN rather unconvincingly argues that Depository’s stated use would contravene the community-developed acceptable use policy. Without bulk Whois, it’s hard to see how Depository can reliably sell routable address space to its own putative registrants. But how could a private firm with no obligation to the multi-stakeholder process or global Internet community get its hands on addresses and legitimately sell them on?

Many of the initial Internet address allocations were enormous; giving rise to the oft-stated complaint a few years ago that MIT had far more IP addresses than China. Initially, Internet address blocks were doled out to techies ‘in the know’ and in countries that got their Internet acts together quickly. In the early 2000’s, the UN’s International Telecommunication Union (ITU) – which had initially ignored the Internet or railed against it – started clamouring to be the numbering authority. ITU’s argument that a closed shop of rich country engineers could not be allowed to divvy up the global public pool of address space resounded strongly with its largely developing country membership. But those interested in developing the Internet itself, and not simply using IP addresses as a communications ministry cash cow, agreed that the while the ITU proposal might arguably be fair, it was far from efficient. Something had to be done.

With political pressure and enormous effort from the technical community, a global network of five regional Internet registries (RIRs) was created. (Some, such as ARIN, pre-dated this effort. AfriNIC was created in 2005 with much jubilation and optimism for the Internet in Africa.) Until last month, the Internet Assigned Numbers Authority (IANA), which is effectively part of ICANN, gave address blocks to the RIRs who then distribute them in their own regions to, for example, telcos and Internet service providers. The RIRs are run fairly transparently and answerable to local technical communities that set the allocation policies and oversee the management. The RIRs are a set of regional and, I believe, natural monopolies of a non-divisible public good. That public good is a publicly available, equitable and authoritative global addressing system.

Now that IANA has given out its last blocks of numbers, the end game of IP number allocation has finally begun. The Asia Pacific registry, APNIC is expected to run out first, in a couple of months’ time. As the final blocks of IP numbers filter their way down through the allocation system, demand for them increases. IPv6 deployment may not be happening quickly enough to forestall a scramble for the remaining pool of IPv4 addresses. Meanwhile, scads of IP numbers allocated in the early days of the Internet are lying dormant. The organisations who got them sometimes no longer exist or have no interest in returning them to the public pool.

ARIN, the north American regional Internet registry, was created by the technical community long after the original addressing allocations were made, and doesn’t have a legal relationship with many of what are called the ‘legacy holders’ of address blocks. To keep information about large parts of the unused address space from going dark, ARIN continues to point its tables to these blocks. Not everyone likes the ‘implied authority‘ over the addresses this creates, but it seems like a pretty straight forward public service to me.

Depository Inc. sees these legacy holders as its way in. If it can create a market for this scarce and diminishing resource, Depository will attract many of the address blocks back into circulation.To do this, it needs to be able to run its own authoritative registry of numbers, mirroring that of ARIN. ARIN doesn’t want to give that access and is prepared to fight hard.

Depository’s letter to ICANN contains a fair amount of self-serving rhetoric about the inherent value of competitive markets. Coming from a former senior employee of the murky Network Solutions Inc, it complains that the people who broke up NSI’s unseemly monopoly on the entire domain name system have no place standing against another private US firm’s desire to profit from the scarcity of a global technical resource. The people involved in Depository include domainers, the unloved speculators who, depending on your view, hog useful names and clog up search results and create no discernible value, or generate prices and therefore efficient and competitive markets in valuable virtual goods. The Depository arguments are couched in purely US terms, with no consideration of the implications elsewhere. The implicit threat of invoking a US antitrust investigation is made by copying the letter to James J. Tierney, Chief Networks and Technology Enforcement Section Anti-Trust Division of the United States Department of Justice.

As IP numbers run out, their possible value in a free market would sky-rocket and make lots of money for Depository. But how would IP profiteering play out in the rest of the world? How fair is it for developing countries, who missed out on the enormous initial allocations to mostly US institutions, to once again be priced out of available numbers? RIRs have publicly available and community-developed policies for how to deal with re-allocated blocks. The whole model of community-based stewardship of a diminishing global public good is under threat by the desire of a small number of people determined to profit from scarcity.

ICANN appears to have largely left this matter to ARIN to sort out. This is tactically sound, since ARIN just needs a couple of years of delay tactics to see off this challenge, before scarcity-induced IPv6 deployment is decisive. But ICANN / IANA and the global technical community would do well to re-assert the principle that the open allocation model for IP numbers – while imperfect – has been cultivated for sound technical and political reasons. We expect domainers and profiteers to freely exploit legal loop holes to make themselves money. But these predators are still just a small part of a big and complex ecosystem, and their narrow interests do not override the public interest.

Hat tip to the Goldstein Report for publishing the correspondence link.



Farren 03.17.11 at 2:10 pm

Maria I don’t have much to say on the topic just commenting to say thank you for this. Very interesting.


Metatone 03.17.11 at 2:15 pm

The worst thing about domainers is that half the time they have no interest in actually selling… they make their money off link-farming and ad-farming… perhaps we can expect a similar outlook for the Depository’s IPV4 addresses…


mpowell 03.17.11 at 2:46 pm

As unsavory as these folks are, if they can reroute unused IP addresses to people who are interested in using them, does this actually hurt anyone? Less wealthy countries currently do not have access to these IP blocks, so their inability to afford them in auctions conducted by Depository isn’t completely relevant. Or could ARIN/ICANN just conduct public auctions of these blocks themselves for blocks whose owners are willing to sell at whatever price the market would bear? Unless the principle is that IP addresses must never be sold, it is hard to understand why we would not seek market solutions for the scarcity that will result before IPv6 deployment.


Maria 03.17.11 at 3:26 pm

Thanks, Farren.

Mpowell, I’m certainly open to argument on this and would like to understand better what is being and could or should additionally be done to hoover up the unused blocks and release them for use. I posted this piece hoping to elicit some of that.

Market approaches certainly have their place, but in a thought-through and organised way, and not as an ad hoc outcome of one particular scheme. I am concerned, though, that auctioned blocks will go at prices that the people who arguably need them the most can’t afford.

Another aspect I didn’t raise is how important or distracting this issue is in a world where IPv6 deployment needs to be the priority.


mpowell 03.17.11 at 5:50 pm

Maria, I can certainly see how letting Depository dominate the process might be a bad idea. What kind of improvement could they offer over some sort of auction anyhow? But unless you’re willing to just seize unused IP blocks, I don’t see how you could ever redistribute them to people who need them but can’t afford them.


zamfir 03.17.11 at 6:10 pm

I am sure I am missing something, but what is wrong with ‘just seizing’ unused blocks? It’s hardly obvious that they are the deserved property of the current holders, and taking the blocks doesn’t hurt people who are not using them. Perhaps some compensation fee for people who have to reorganize their systems to use a subblock of their old block. It’s only a market of private property if choose that it should be that.


chris 03.17.11 at 6:22 pm

But unless you’re willing to just seize unused IP blocks

Well, why shouldn’t you be? Addressing space is limited and not using it causes it to go to waste. Especially in the case of organizations that are no longer interested in maintaining those blocks (or no longer exist), allowing those blocks to sit idle only exacerbates the threat of address shortage. They clearly should be reclaimed and reallocated to *someone*; the only question is whether the richest entity should necessarily get them or whether some other considerations should be taken into account.


Leo Vegoda 03.17.11 at 7:37 pm

@zamfir I won’t address the issue of seizure, which is probably legally complex. Lots of the address space was allocated in the early days of the Internet, when the routing technology did not allow the high efficiency of use that is currently possible. When this address space is in use, the usage is often sparsely distributed throughout the block. So a policy discussion about “just seizing” these blocks is probably less useful than agreeing a policy for voluntary transfers.

There is a very short summary of the current policy on the NRO web site at:


I would also suggest that point Maria made towards the end of her post and in comment #4 is key: deploy IPv6. With less than 4 billion usable addresses, IPv4 is always going to be inadequate for a communication networks spanning a globe with a population approaching 7 billion people. Widespread IPv6 deployment will allow address scarcity to be a temporary phenomenon. There are all sorts of other social goods that come from that, but that would be a separate blog post.


yoyo 03.17.11 at 9:54 pm

I wasn’t aware that there is significant issues that will come up before IPv6 gets rolled out, other existence old components that can’t upgrade to IPv6 (or end users who don’t know how to etc).


Ted 03.17.11 at 10:39 pm

This is probably a weird parallel, but my first thought was Cuba pre-Fidel. Vast sugar plantations, almost exclusively foreign-owned, covered most of Cuba. Cuba’s major export was sugar, geared towards the American market. However, in the mid-20th century, advances in technology made beet sugar cultivation quite profitable. Cuba’s advantageous climate didn’t count for much, since beets can be grown pretty much anywhere, and so its sugar industry, based off sugarcane, suffered from a worldwide glut of sugar.

The companies took what was, to them, rational economic decisions and let parts of their plantations run wild. They didn’t want to add to the sugar glut, and there would be no profit in producing more sugar. This decision antagonized most of the Cuban people.

Sugar cultivation required a large workforce during harvest time (4-5 months of the year) but a skeleton crew the rest of the time. Many Cubans were therefore unemployed for most of the year, and didn’t get any type of welfare either; they became roadside squatters. When the sugar plantations began not cultivating large swathes of their land, Cubans wanted to use it to grow their own food, but the sugar plantations refused. The Batista government didn’t really push them, and popular discontent eventually boiled over. In the Internet world, well…people want that unused land!

Here’s hoping IPv6 doesn’t have (m)any issues… :)


James Norris 03.18.11 at 8:27 am

IPv6 has some serious interoperability problems with today’s IPv4 Internet. Here’s a rather opinionated take on the issue: http://cr.yp.to/djbdns/ipv6mess.html


Latro 03.18.11 at 4:26 pm

I lost the thread at some point of the explanation, and would like clarification.

There are large blocks of assigned but unused IPv4 addresses – that I know.

This guys from Depository want… what? To copy the whois records wholesale for… for.. .for what? What does knowing that gives them a “market”? The addresses are already assigned, arent them? ARIN is the one that can reassign them, if they are returned/seized/whatever, not this guys.

What do they want? A list of orgs to spam with “you could be selling your blockis in our auctions and MAKE BIG BUCKS TODAY!!!!1!!!” ? Again, Ilost the steps to profit at some point of the explanation, sorry.


PHB 03.19.11 at 5:00 am

IPv6 is a big mess. There has never been a credible transition strategy. The idea is that people wil move to the IPv6 net of their own accord. But if you turn off IPv4 you will find that even if you have IPv6 connectivity from your ISP (doubtful) and your network router passes it correctly (also doubtful) there is virtually nothing to connect to.

Nobody is going to accept an IPv6 address unless it does at least as much as an IPv4.

But that rather obvious fact has been hostage to silly attempts to kill NAT boxes and restore someone’s idea of what the Internet should have been like.

I don’t see much value in the Depository Inc approach. There wil be plenty of people offering auction services. The problem is going to come from people selling address space they don’t own. In many cases nobody knows who really has the allocation and the whois data won’t help either.

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