Beware the black market rising for IP addresses
SAN FRANCISCO  – Organizations slow to adopt IPv6 take heed: Surging requests for IPv4 addresses are quickly drying up the available store, raising the specter of an IPv4 black market that could dramatically increase the cost of obtaining a presence on today’s Internet.

Previous predictions pegged late 2011 as the anticipated date of IPv4 address exhaustion. But a sudden turnaround in the rate of allocation for IPv4 addresses this year has consumed an alarming number of “/8” IPv4 address blocks — /8 being the unit of allocation to Regional Internet Registries (RIRs).

“There were just eight /8 allocations in all of 2009, but there have been six /8s issued just in the first 100 days of 2010,” notes American Registry for Internet Numbers (ARIN) CIO Richard Jimmerson.

As of this writing, only 20 IPv4 /8s remain in the Internet Assigned Numbers Authority (IANA) pool of 256 /8s. At the current rate, the IANA pool may well be exhausted by the end of this year (see graph). And though the transition from IPv4 to IPv6 has been long anticipated, many organizations are ill-prepared for the fallout of IPv4 exhaustion. In addition to being required to maintain Web presence in both address spaces until the Internet’s transition is complete, new services, such as Microsoft’s DirectAccess, are increasingly becoming available only on IPv6, as tech vendors and service providers increasingly find IPv4 too expensive to support.
The coming IPv4 shortage has been foreseen for years, but organizations needing an Internet presence — businesses, educational institutions, government agencies, and the like — have largely been in denial about the inevitability of IPv4 exhaustion.
IPv4, which uses 32-bit addresses, is capable of supporting 4.3 billion total addresses, but severe fragmentation makes utilization of the full range of IP addresses inefficient. Worse, many consider reclaiming unused IP space a far too complex and expensive undertaking. As such, when the last IPv4 /8 is allocated, new Internet players could find high prices and a black market the only practical means of getting IPv4 addresses.

Well-known Internet engineer and notable Internet “pseudo-economist” R. Kevin Oberman points out that this black market already exists, albeit on a small scale.

“The probability of black market growth depends on how run-out of IPv4 addresses is handled by the regional registries,” Oberman says. “A black market is uncontrolled by definition. If you have a commodity that has value and is required for commerce, the price will rise to whatever willing buyers will pay.”

Currently, Oberman notes, IPv4 addresses are still relatively easy to get, because significant anti-fraud measures haven’t yet been put in place by registries such as ARIN.

“Most of the current black market is a matter of convenience, because ARIN’s IPv4 costs, and those of other registries, are low for large organizations. But if you’re a small company, the expense can be fairly high,” Oberman says. “If the survival of your business depends on getting IPv4 addresses, you’ll be willing to pay for them, even if you have to skirt the rules.”

Oberman believes that regional registries such as ARIN should head off a potentially deleterious black market by creating a “white market” with established rules for trading IPv4 addresses at market-established costs.

ARIN’s Jimmerson agrees that an accelerating black market for IPv4 addresses is possible. Yet ARIN’s membership has been proactive about providing at least limited address transfer opportunities to mitigate that problem, Jimmerson says.

“ARIN is a member-driven organization, but even non-members from the Internet community at large can participate in the policy development process,” Jimmerson notes. “That community has proposed a policy change, which ARIN recently adopted, to permit an IPv4 registrant to transfer numbers to another party.”

Under that new rule, a company can return IPv4 numbers to ARIN and designate the intended recipient. ARIN isn’t involved in any financial transaction that may occur between the parties, and only promises the recipient will receive the addresses if the recipient first files, and ARIN approves under its transfer guidelines, the necessary usage justification forms.

“There may still be black market activity, but with this policy, it’s more likely that people will transfer numbers out in the open,” says Jimmerson. “The important thing is that IPv4 registration records accurately identify the registrant who has authority over each allocation.”

Jimmerson believes organizations are less likely to engage in black marketing if their business names are attached to the numbers being trafficked.

“It’s very likely that over the next year the community will continue to fine-tune the address allocation policy set, which includes both IPv4 and IPv6,” Jimmerson says.

Such a move could mean price increases as depletion nears. Under today’s rules, a small organization would pay a minimum of US$1,250 annually for a /24 assignment, which represents 256 addresses, the smallest block that can be portably routed on the Internet. Smaller allocations than this must be obtained from an ISP, at the cost of a few dollars per month per IP address. Larger organizations could pay between US$4,500 and US$18,000 per year, but in all cases address holders must provide justification to their registry to continue using IPv4 allocations.

As IPv4 nears exhaustion, Oberman’s vision of a pricey black market could still materialize, even with ARIN’s new transfer policy.

“The problem is big enough that you’ll never have 100 percent enforcement, which is why we have a small black market today,” Oberman says. “People could start speculating, and that will drive prices up on both black and white markets.”

A possible stress reliever could come in the form of forced reclamation of unused, or fraudulently used, IP space.


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