Microsoft spends $7.5 million on IP addresses

Kevin Murphy, March 24, 2011, 13:22:24 (UTC), Domain Tech

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.

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Comments (19)

  1. Adam says:

    “It’s official, IP addresses are now more expensive than domain names”. Unless your shopping at Network Solutions

  2. [...] million for a block of IP addresses at the bankruptcy of telecommunications company Nortel Networks according to Domain Incite. Nortel’s assets included the block of 666,624 addresses, one of a limited supply of IPv4 [...]

  3. [...] производством сетевого оборудования, эта компания продала корпорации Microsoft пул из 666 624 адресов за 7,5 миллионов [...]

  4. Uzoma says:

    “Nortel Networks, the bankrupt networking hardware vendor, has sold 666,624 IPv4 addresses to Microsoft”

    Isn’t 666 the mark of the devil? Microsoft had better be careful!

  5. [...] Domain Incite notes, that's $11.25 per address, making the IPv4 address space theoretically worth around $48.3 [...]

  6. [...] $11.25 per IP address. The deal is part of Nortel’s bankruptcy, according to court filings. Domain Incite reports that the cost for each IP address is more than you’d expect to pay for a .com domain [...]

  7. Frank says:

    “But this kind of “black market” – or “gray market” – for IP addresses has been anticipated for some time.”

    ARIN specifically has a policy to facilitate the sale of address space: https://www.arin.net/resources/request/transfers.html

    Nothing gray or black about it if this they follow the policy.

  8. [...] is volgens nieuwssite Domainincite.com al ruim een jaar gesprekken aan het voeren met potentiële kopers van deze IPv4-adressen. Van de 14 [...]

  9. [...] производством сетевого оборудования, эта компания продала корпорации Microsoft пул из 666 624 адресов за 7,5 миллионов [...]

  10. Anonymous says:

    [...] hat 666.624 bisher auf ihn registrierte IPv4-Adressen an Microsoft verkauft, wie unter anderem DomainIncite unter Berufung auf Gerichtsunterlagen (PDF) zum laufenden Insolvenzverfahren des kanadischen [...]

  11. [...] IPv4 é de 4 bilhões: parece muito, mas realmente já está quase tudo ocupado.Segundo o site Domain Incite (via The Register), a Nortel, uma empresa norte-americana de telefonia e redes, entrou em processo [...]

  12. [...] IPv4 é de 4 bilhões: parece muito, mas realmente já está quase tudo ocupado.Segundo o site Domain Incite (via The Register), a Nortel, uma empresa norte-americana de telefonia e redes, entrou em processo [...]

  13. [...] Bankrupt Nortel sold 666,624 IPv4 addresses to Microsoft for the sum of US$ 7.5-million, which is over $11 per IP address. 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.". Read more here [...]

  14. [...] Incite, a blog that covers the domain name space, noted that the $11.25 per address that Microsoft has agreed to pay is more than what one would expect to [...]

  15. drmike says:

    This black market has existed for years. It’s nothing new. They’ve been trading them for years:

    http://www.merit.edu/mail.archives/nanog/2003-04/msg00775.html

  16. [...] Industry Canada department, is also against the trade of IPv4 addresses, and it has weighed in on the sale of Nortel’s addresses to Microsoft. In a letter discussed on CircleID, Industry Canada expressed its support for the long-standing [...]

  17. Joop says:

    Microsoft could als be buying IPv4 space – and not use it – to speed up sales and support revenue.

    A (forced) transition from IPv4 to IPv6 will also sell new operating systems, support services and networking equipment.

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