Back in 2010 just before ARIN ran out of the IPv4 addresses and again when the IP prices were around $5 per IP no one would ever think that after ten years the cost would be four times bigger and some of the Telcos would even struggle to board their customers due to the shortage of the IPs. Fun fact, due to fast Internet penetration, the IP transit prices per Mbps are going down while IPv4 prices are going up. But I would not correlate them both together, because they have different reasons. During the pandemic times, we saw Netflix, Youtube, and other video streamers cut down their video quality, especially in the European region. That is because the Internet is not enough for the whole population or at least the majority of it. The more fiber and the more submarine cable we install, the more capacity we have, but it is still not enough. However, the more fiber providers we have, the less we will pay for the Internet. IPv4 has different reasons why the prices are going up, but it is different circumstances. There are 4.3 billion IPv4 addresses, and it can’t be more than that. The limit of the resources as any other limited resource in our world gets it’s on valuation based on the size of demand and limited supply.
Moreover, a new industry appeared in the IP brokerage market, and even RIRs recognized it. The sector itself evaluates billions of dollars. Amazon alone bought around 20 million IPv4 addresses in 2019, and it is still on its momentum this year.
History of IPv4
Let’s look a little bit closer to IPv4’s historical development. Back in the 80s, when IPv4 standard was introduced (featured image above), nobody had a clue about the upcoming explosion of the global population. The technology progress made it happen. Mobile phones, higher income per household, internet penetration, and the major world’s economic growth are the most significant drivers. Not to mention the competition between big technology companies competing in the consumer market.
By the way, by that time in 1981, planet Earth had 4.512 billion population. Let’s dig deeper into why IPv6 was not there from the beginning, and instead, IPv4 was the option.
Reading the RFC760, which was one of the first documents prepared by Information Sciences Institute University of Southern California for Defense Advanced Research Projects Agency Information Processing Techniques Office to describe what is the Internet scientists. Researchers did not pay attention to the circumstances mentioned above. However, they did a tremendous job because the Internet community did not need to think about the IPv4 capacity for decades. Here is the chart of how the Internet penetration took off. By the way, everyone thought that during the dot-com bubble, the Internet would get even more prominent, but many crises take something out and bring something new. An excellent example of the dot-com bubble Google and Amazon found their place in the market and are the most prominent Internet companies globally. Let’s come back to the question of why IPv4, and not straight to the IPv6. It is because by that time, technological progress was not as significant as it is now. However, not much population could afford what we can afford today. 4.3 billion IPv4 addresses sound like it is sufficient for a long time. And it was for more than four decades. We had no problems with IP address shortage. Back in the ’80s, scientists did not even think about DDoS attacks, spam abuse, or petabytes of data pushing around the globe daily. That was something unreal.
In 1999, the new standard got introduced. It was IPv6, and, notably, the Internet community was already in their thoughts that IPv4 will not be enough. The Internet became a more advanced ecosystem. With IPv6 standard introduction, many security issues were addressed and with much better performance than IPv6. The capacity of IPv6 is so large that even in 2020 we think that this would be more than enough. Okay, let’s get back a little. Can you notice the similarities? IPv4 was enough in the 80s, IPv6 is enough for today, but it will be enough forever since we have exactly 340 undecillion IPv6 addresses, which is 340,000,000,000,000,000,000,000,000,000,000,000,000. I have tried to calculate how many smartphones are in use globally, then I took desktops and laptops, but then I realized that I need to give up on that because the number of IPv6 is simply too large and it will be sufficient infinitely.
Getting back to the world’s population, based on the United Nations research, the number of people would reach its peak of 15,8 billion people in 2100, considering the amount of IPv6 it is a home run. Today’s struggle is the adoption of the IPv6, which I will touch a little bit later.
The interesting fact that even today, the internet is so enormous, but there is a pretty small group of businesses that develops it, and we are proud to be the part of this small community.
IP Price Analysis
Let’s talk about how the IP prices went up and what influences its growth. Analyzing the data of the transfers per verticals, we have noticed that the most significant buyers during the last five years’ time of the IPv4 are Hyperscalers, Telco/ISP, IP transit providers. This is how we did our research:
- Firstly, we know from our experience that small and medium businesses do not have so much cash or are not able to raise funds solely for the IPv4 space. That is the reason why we have decided to split the research data into four segments:
- Those who bought up to 1K of IPv4.
- Those who bought from 1K to 10K of IPv4.
- Those who bought from 10K to 100K of IPv4.
- Those who bought 100K+ of IPv4 within the last five years.
- We analyzed the data from APNIC, ARIN, and RIPE, and we took the last five years of data that are available publicly.
- In total, it was around 350 million IPv4 transferred during the five years’ time.
- We took some data from some IP brokers. The prices reached from $18 to $25+ per IP address, and the prices increased from 25% to 30% depending on the subnet size.
- The major and the largest segment is 100K+, which has Hyperscalers, Telco/ISP, IP transit providers, and it has 93% of the IP transfer market. It means that transactions that were over 100K+ have the most significant impact and make a lot of changes that have the most significant IPv4 allocations.
- Then if we would take 10K to 100K segment, we saw that the majority of the industries are data center operators, Telco/ISP, and VoIP providers. That part has 5% of the IP transfer market.
- Analyzing the 1K to 10K, we still see the data center operators, but no Telco/ISP or VoIP providers are in it. It shares 1.76% of the market and has a small and medium business, data center operators, and the hosting industry.
- Lastly, the smallest segment is up to 1K. It has only 0.24% of the market share, and the majority of the transfers completed by the same verticals that are within the 1K-10K segment.
The research shows that the most significant stakeholders of the IPv4 transfer market are the giant enterprises that are entirely dependant on the IPv4 addresses, and they would not be able to sustain their growth if no IPv4 addresses would be in the market. Another fact that is very important – IPv4 prices are growing, and the growth is aggressive. The significant factor here is the technology and internet penetration, including the IoT development, which we believe will going to be the vital factor for the IP addresses utilization, not to mention the 5G appearance in the technology arena.
Let’s focus now on the sellers. Many of them were the most prominent companies back in the ’00s like Hewlett-Packard or Xerox. No doubt they are still significant, but not as big as Apple or Amazon, during our research we saw them often appearing as the sellers. That shows that their focus is going offline and the IP allocations they had in their possession is no longer a case. However, if you consider selling IPv4 addresses you have in your RIR account, please contact us before doing this, since we can help your business to guarantee the monthly revenue by leasing the IPv4 addresses. More about how we do this, please continue reading this article.
IP Lease Analysis
While many large enterprises are feeling unsafe leasing the IPs (more about the security shortly), and instead they buy them. We can firmly agree that the IPv4 address became the commodity and the commodity that build a billion market industry. Referring to that, it also created the IP lease market, which is relatively large, but no one knows how big it is. Thankfully we are in progress helping one of the largest and one of the most valuable academic organizations. They are currently conducting the actual IPv4 lease market research and more information about it we will publish once the study is ready.
We see that the IPv4 transfer price has a direct impact on the actual IP lease price. I remember the times when you could get IPv4 addresses for $0.10 per IP per month. Then it went up to $0.15. Today you hardly would find anything below $0.25 or less. Let’s talk about IP pricing and how it is structured:
- The research source is our database, and we have conducted it based on our data and ten years of experience in the IP lease industry.
- You have to pay for the smaller subnets. There are the same rules in the IPv4 transfer market: the more you buy, the less you pay.
- IPs with the more extended lease contract could reflect the price, but that definitely would indicate if it is a large allocation, larger than /19.
- We serve around 75 verticals taking into consideration all our customer base. 80% of the revenue covers around 25 of them.
- The seasonal periods are also making an impact on the smaller range or larger ones. Please note, we do not work with spam abusers. If we ever get any of them, we reject any service continuity for them.
- We are in progress of drafting a monthly basis where we would show the trends from /24 to /16 IP lease monthly price ranges. You can expect it in May.
- We do not influence the pricing of IPv4 that is in the IP Address Market. IP holders control their stock and pricing. Expect the ranges we have in possession.
- The most popular subnets are /24, /22 and /19.
- The lowest price per subnet is $0.33 per IP per month.
- The average price for IPs is $0.55 per month.
- The highest price for IPs is $2.00 per month.
- The more accurate data will be within our monthly price overview. In that report, we will show how the pricing is set per each subnet so that you could have a better understanding.
- Most IPs are from LACNIC, then we have ARIN, RIPE, AFRINIC, and the last is APNIC.
- There are subnets from /32 up to /16.
- However, we have around 80% of all IPs leased out from all of the IPs that are currently in the IP Address Market.
- IP holders can select a minimum of 12 and up to 60 months IP listing, if the initial term will expire, the IP holders can extend it.
Let’s compare the IPv4 transfer price and IPv4 lease pricing. The business can estimate that taking the IPv4 from the IP Address Market, your company can save a significant amount of money. If you need a /22 of ARIN IPv4 addresses based on the current pricing, you will pay $25,600.00 (/22 = 1024 IPv4). While leasing, it would cost you around $563.20 per month. It works up to nearly 46 months, paying out the $25,600.00 on a $563.20 monthly payment basis.
The price based on our IP Address Market price, not to mention if you would commit a more extended period, the price might go down, since we ask the IP holders to provide different pricing on the pricing ranges, here is the step where we ask that:
There are obvious savings to consider since the business does not need to invest a large chunk of cash in sustaining its growth. The technological stack we have developed around the IP Address Market allows using the IPs as they would be allocated to the actual business directly from RIR.
IP Lease Benefits vs. Risks
Benefits of IPv4 Lease
What are the advantages of an IPv4 lease for the businesses that are looking to lease the IPv4?
- As I mentioned previously, it is investment efficient, and businesses do not need intense investment to scale the IP space and sustain the growth.
- Business does not need to be in the RIR waiting list for months or even years. It can provision IPs within the moments using Heficed’s IP Address Market.
- The business has flexibility in payment structure and pays every month.
- The IP Address Market allows access to any RIR IPs, and there is no need to have an account in any of them. One thing to consider, if the business is planning to expand into the African or Latin American region and if it has no presence in those regions, it will encounter extra costs, and sometimes they can be significantly high to run the local company.
- All our clients have a 24/7 support team and network professionals who can advise on the best network setup and IP allocation.
- ASN management from any RIR is an available option too.
- Heficed handles all abuse and spam reports, so if there is any abuse breach or spam that you are not aware of, our abuse team will inform you about it straight away.
Risks of IPv4 Lease
We can’t neglect the fact that there are and disadvantages of leasing IPv4 space. Let me explain how we handle it.
- If the IP holder would stop the advertisement of the IPs and want to take the IPs earlier than the business commitment ends, we have developed a solution to this problem. Firstly, Heficed stays transparent, so if the IP listed for 12 months, then it should when exactly the IPs removed from the IP Address Market. Secondly, we give a choice to the IP holder to renew their IP listing three months before the listing, so the business can be informed before the listing expiration, that the IPs will stay for another 12 months. We never encountered any problem with that, and we onboard each IP holder and communicate regularly with the IP holders driving excellent monetization performance for the subnets they list in our IP Address Market. However, that risk management sits on Heficed shoulders, which we do it right.
- Price increase after some time. It can occur if the IPs not leased after the expiration date. That means that if you are committed to 1 year, then you can be assured that the IP prices you lease would not go up. However, we still have a monthly billing cycle for the IP addresses, but shortly we will introduce up to three years billing cycles where the businesses would be able to lock the price for the whole three years.
In other words, the risks that we have identified are easily manageable. Still, the most important thing is the performance of monetization and the risk management we absorb on our behalf.
Benefits for IP Holders
Since, with this blog post, I would like to do a 360 analysis, I want to list the benefits and risks for the IP holders too.
- Extra revenue from the unused IPv4 space; additionally, we will provide IPv6 support, too, so the IP holders of IPv6 would be able to monetize their IPv6 space as well. Yes, there is a market for IPv6 as well!
- IP hi-jacking protection included in Heficed services. If the IP holder’s IP space is unused or unadvertised, we make sure that it will advertise where it should be, and we monitor it 24/7.
- Protection and management of abuse and spam cases that could appear from time to time, essentially if the client is within the high-risk industry.
We have some features planned that would fill up the benefits list, but those I have listed are the major ones and are the most important ones.
Risks for IP Holders
Evaluating every aspect, and no doubt that there are risks for the IP holders to consider. However, our platform solves those risks.
- IP space can get abused or blacklisted.
- Payment issues when the end-user stops paying.
What about IPv6?
IPv6 is an excellent way of expanding the internet, but we must admit IPv6 would not work without IPv4. I remember back in 2019 when I was in NANOG Austin, TX, I had a great chat with the biggest ISPs, and this is what I found out. The majority of the US ISPs are already running dual-stack, which is IPv6 in parallel with IPv4. The ISP that provides content, they host that on IPv6 only, so they do not use any of the IPv4. Then I had a question where they use the IPv4 addresses that are left unused. To be honest, I was expecting the answer they gave me: “We give our IPv4 resources to one of our cloud providers who host our content in return to the cloud credits”. Bingo! It is where it proves the ideology of the Internet, that every resource can be shared. Especially the IPv4.
Anyway, going back to the IPv6, what I think would be the obstacle is the 3rd world countries. IPv6 has no benefits in supporting it, what so ever it requires additional investments to support it. Since the IPv6 can access 25% of the internet, that progress achieved within 21 years, I would say we need another two decades to make IPv6 a robust protocol to plan the IPv6 network only growth. I am taking into consideration that 3rd world countries are not capable of adopting IPv6 like European or N. American networks do. I believe we will see some subsidiaries or grants adopting the IPv6 because by the end of the day, having the sustainable network world’s economy can grow faster.
The biggest IPv6 developers are hyperscalers, big respect for them. Then we had Telcos and ISPs. The largest RIRs for IPv6 development were and are APNIC and RIPE. The smallest RIR in IPv6 adoption is AFRINIC. That also shows the insights in which countries and regions are the most prominent developers of the IPv6.
IP Address Market
I would like to show you what we have done so far with the IP Address Market and what our next plans for the new features. Since our IP Address Market is available from November 2019, we have been working a lot with our partners and looking for the new ones listening to their suggestions and adding all of them to our priority list – the roadmap. The platform is a unique solution, and we combine technologies with business-driven common sense.
The platform MVP was minimal, and all that we have offered was adding the IP addresses and searching them with minimal filter tools. After a massive six months of development, we have introduced so many changes and got a lot smarter view of how things work. It is what we have submitted within our six months of a home run:
- Ability to search for IPv4 addresses by A, B, and C class.
- A GEO location search by MaxMind, IP2Location, and DB-IP. We are also considering IPInfo.io with even more advanced and more productive data capabilities.
- Lots of UX/UI improvements got introduced, watching thousands of user sessions videos on how our clients interact.
- Abuse/spam prevention procedure, including effective management and prevention, is our priority, and we are continually improving it.
- RPKI validation, and yes, we are huge fans of RPKI. 80% of the IPs in our IP Address Market listed with ROA instead of LOA, which is incredible.
- From the IP holder standpoint, we have eliminated any chances that IPs brought to the IP Address Market would be hi-jacked since we validate the person who is bringing the IPs. Abuse-c contact validation and route object validation also carried out.
You can follow Heficed on LinkedIn, Twitter, or Facebook to see the latest releases of the new features rolling out almost every week. What’s next on our roadmap? By the way, some of the features listed in our roadmap are not necessarily aligned with the priorities. If we notice something that has to be addressed immediately, it is included in the roadmap as well.
- TAIP – take away IP. This feature would allow our clients to announce the IPs on their own or 3rd party networks. Since we encountered many technological obstacles, we needed to think very carefully about how the management and control of the BGP session would look like from the IP lessor, Heficed, and lessee perspectives. The feature will be available in June.
- IP health is also essential and to demonstrate our capabilities in managing the abuse and spam. However, we have a fully working concept in our backend, and it is already in place. Still, we want to expose it publicly, so that majority of the information would be available to the IP lessors. That includes blacklist check, abuse or spam reports, and any other related information.
- BYOIP, in other words, is called Bring Your Own IP, which allows any IP holders to bring their IPs and use it on the Heficed infrastructure stack. The IP holder does not necessarily need to monetize the IPs.
- Improved payout section available for the IP lessors. We would give more details on monetization performance and a better view of the payout ledger.
- The IP billing cycle seems to be a straightforward one. Still, thinking about the longer commitments from the IP lessees, we also thought about the IP lessors where they would be able to auto-recalculate the prices if the IPs listed for longer than 12 months. Additional options would also be available in terms of the longer prepayment.
- If you have noticed on some of the subnets, there is a Make an Offer option. We have been testing it for some time. It seems this option would make a lot of sense to extend to that level where the IP lessee would be able to offer their price for the IP lessor, and IP lessor would be able either to reject, approve or give their final pricing.
We have planned to dedicate all 2020 to the IP Address Market, and the majority of our development time will be focused solely on it. Many other features are on our roadmap, but due to the solution complexity, we are still researching the best possible way to implement them.
The Old Thinking vs. Efficiency
There are many debates on the IP leasing topic, and we must admit that IP lease is a grey area, which we aim to bring as the new industry standard despite some arguments that are going around the different RIR communities. However, many of the providers do that already, including the ones who have a massive influence in the local regions and in the global arena. We strongly believe that old thinking will not lead us anywhere. Instead, we should think about how we could support the internet ideology sharing the resources and have a beneficial outcome out of it. We believe that combining the technologies that are available in today’s internet should be used for better governance and somewhat transparent data availability to know precisely how the internet develops its way. Finally, we are firm believers that only business-driven decisions can make the right outcomes for the community and all internet development. We are in 2020, the technological age of changes, and the more we are committed to it, the better environment we will create around us.
So, should businesses buy or lease IPv4 addresses? Considering the increasing prices of the IPv4 addresses and seeing the ever-increasing demand of the IPv4 addresses, especially the large subnets, we firmly believe that the next big thing is the IP lease. The right control around IPv4 using available technologies and educating the businesses to learn more about how they can benefit from the IP lease. The biggest motivation for the IP lessees is undoubtedly cost-saving and easier access to the IPv4 addresses. While for the IP lessors, it’s an excellent opportunity to keep the IPs within their allocation and monetize it.
- Features image used from https://en.wikipedia.org/wiki/IPv4_address_exhaustion
- Internet penetration chart https://ourworldindata.org/internet
- IPv4 transfer prices https://ipv4marketgroup.com/ipv4-price-trends/, https://ipv4.global/2019-ipv4-address-market-roundup/
- IPv4 transfers five years of history https://www.apnic.net/manage-ip/manage-resources/transfer-resources/, https://www.arin.net/reference/research/statistics/historical/, https://www.ripe.net/manage-ips-and-asns/resource-transfers-and-mergers/transfer-statistics/within-ripe-ncc-service-region/ipv4-transfer-statistics