IPv4 address prices go through the roof

"IPv6 adoption needs to really speed up"

Over the last year, IPv4 addresses have doubled in price. On the IPv4.Global virtual marketplace, prices now range from 50 to 60 dollars per address, depending on the block size. That's twice what they were just twelve months ago.

The prediction made two years ago by Vincentas Grinius, CEO of London-based hosting provider Heficed -- that the price of an IPv4 address would double in the next five years -- has therefore been fulfilled even sooner that he envisaged.

The current and future affordability of IPv4 addresses is clearly open to question. However, the economic desirability of the situation is more questionable still. When technical assets that were available free of charge until quite recently command such high prices, the result is a biased market where smaller players and new entrants are unfairly disadvantaged. Given that the IPv4 shortage/IPv6 adoption problem also impedes innovation, the argument for government intervention is gaining weight.

Graph showing the price development of IPv4 addresses in the period June 2020 - April 2022
Graph showing the price development of IPv4 addresses in the period 2014-2021

We've often written about the technical and economic consequences of the IPv4 address shortage. The biggest technical issue is the asymmetry of the existing internet, which seriously restricts the scope for self-hosting and the use of peer-to-peer protocols. Meanwhile, the economic consequences include reduced future-readiness and scope for innovation (with the Netherlands still lagging behind [1, 2, 3] on the adoption of IPv6).

Ability to pay

Since the very last IPv4 addresses were issued in late 2019 by RIPE NCC, the Regional Internet Registry (RIR) for greater Europe and western Asia, the only option open to service providers wanting (and able to pay for) more IPv4 addresses has been the commercial market. Although it's possible to join a waiting list to receive a returned allocation of 256 addresses after the mandatory six-month quarantine period, the supply of addresses available by that route dried up for a considerable period, until a few hundred Local Internet Registries (LIRs) received small blocks earlier this year.

Chart showing RIPE NCC's IPv4 waiting list as of June 21, 2022

IPv4 address block leasing

Obtaining a block of that size is unlikely to be of more than symbolic value to many market players, however. A provider looking to set up a large-scale IPv4-based service won't get far with a few hundred addresses. That was certainly Freedom Internet's experience when the company entered the market. In order to provide every customer with a static, routable IPv4 address as a standard feature of a fully dual-stack proposition, Freedom Internet needed to get hold of tens of thousands of IPv4 addresses. Purchase was prohibitively expensive for the start-up, and the time wasn't judged right for an IPv6-only offering. So the company was ultimately obliged to lease the IPv4 addresses it needed.

"Buying a substantial IPv4 address block isn't a realistic option for a new player," says Freedom CEO Anco Scholte ter Horst. "You're looking at a fairly distant payback horizon, during what's already a very capital-intensive phase of development." Even on a speculative basis, investing hundreds of thousands in IPv4 addresses makes poor economic sense. "That's not our core business, and in ten years' time the addresses will be worthless. I could never have sold that idea to our investors, so we had to lease."

Because the lease on the first IPv4 address blocks wasn't extended, Freedom was forced to assign new addresses to some of its customers earlier this year. "We're still leasing our IPv4 addresses, but from someone else."

Impact on competitiveness

Having to switch customers' supposedly static IPv4 addresses when the lease ran out was bad enough. Worse still, Freedom Internet believes its competitiveness is affected by the ongoing address problem. "Retail margins are tight, and what we pay for IPv4 addresses is an additional cost item that feeds into our pricing model," explains Scholte ter Horst. "So we're inevitably a little more expensive than a rival without that cost."

What's more, the great majority of customers don't actually recognise the value of having one or more routable IPv4 addresses. According to Scholte ter Horst, only about 5 per cent of customers operate (self-hosted) services, even though Freedom's clientele is relatively tech-savvy. For other providers, the percentage is significantly smaller. Consequently, Scholte ter Horst doesn't believe that providers are dragging their heels on IPv6 adoption in order to protect their higher-margin hosting services. "The problem is probably apathy towards change, rather than a vested interest in the status quo."

Given away, handed back or sold

Scholte ter Horst sees the emergence of a market in technical assets that were previously free and handed out liberally as an unhealthy development. "Back in the day, RIPE NCC issued large blocks to numerous entities. For example, SURF has millions of IPv4 addresses, which are now worth a fortune, although its primary task is providing infrastructure for education and research. Organisations like SURF [AMPR is another] now find themselves in a difficult position, because they can't simply give the addresses away. Large blocks are often bought up by internet giants such as Amazon and Microsoft, when really they should be returned."

However, it would perhaps be better if such address blocks weren't made available at all. "The current situation is a brake on innovation and competition. Yet the solution has been right here all along: IPv6 adoption needs to really speed up."