Secondary Redistribution of the IP Address Space. Can the State Help With This?

There is, apparently, a global shortage of free IPv4 address space in the world. Not only that, Internet government organizations have announced that IPv4 addresses have run out… The world’s supply is exhausted! What can be done? One possible solution would be to introduce new networks using the new IPv6 protocol, which offers an infinite number of IP addresses.

Issues associated with introducing the new IPv6 protocol

However, the introduction of new networks according to the new IPv6 protocol is associated with its own particular difficulties:

There are still significant security gaps in the IPv6 protocol. The introduction of the new IPv6 protocol requires enormous financial expenditures for new equipment and facilities, as existing equipment is not compatible with the new IPv6 protocol. So the cost of IPv4 resources keeps growing because of the deficit created.

However, there actually isn’t a shortage at all! The reality is that more than 30% of the existing IPv4 address space is frozen and unused.

IP address space is frozen and unused and about the same number of addresses only appear to be in use. This is true for the entire IPv4 address space used in Europe. A good example of the situation in Germany today is that some companies have a shortage of IPv4 addresses, and others have a surplus of free addresses. However, there are hardly any transactions for address redistribution between such companies; so-called transfer agreements.

The problem with how IP addresses were initially distributed

First, let’s go back forty years, when the distribution of Internet address space among information exchange participants was just beginning. At that time, the potential shortcoming of the IPv4 protocol was not obvious and address space was allocated to any organization that requested it, regardless of their current needs. In cases when a network of /24 (256 addresses) would be more than sufficient, a network of /16 (65512 addresses) was allocated. No one counted the resources allocated because it was felt that they would be enough for everyone and for a long time.

At first, research institutes, government agencies and universities were allocated IP addresses in this way. After that, IP addresses were distributed among large companies and corporations. The blocks allocated at that time could never be fully used, because the Internet participants did not have so many nodes in the networks then. These IP addresses ended up not being used and were forgotten about over time.

Around 30% of the world’s IP addresses unused

With the commercialization of the Internet, the distribution of IP addresses between Internet service providers began, and the degree of use of IP addresses increased sharply. But a large number of blocks had already handed over to those who never planned to use them. As a result, up to 30% of the world’s IP addresses available to various LIRs (Local Internet Registries), equivalent to almost 1.3-1.4 billion, are now frozen and effectively are not used in the global address space. In Germany alone, about 40 million IP addresses are apparently unused and managed by the LIRs, which do not really fulfil their allocation mandate. This is the conclusion of a report¹ by RIPE NCC (Réseaux IP Européens Network Coordination Centre – the European IP address management company).

Chaotic allocation

Most of these unallocated resources have LEGACY² or PI status³. The remaining 70 percent of the IP address also face issues. It is no secret to anyone involved in IT that many companies were rather… chaotic in the allocation of address space during their development phase. A simple example – take a company with a network of size /16, which consists of 256 networks /24, each of which has 256 IP addresses. It was common for system administrators to assign a /24 network for each new project without really thinking about how many nodes it would serve in the local infrastructure.

In the end, the project unit actually used only 5-10 IP addresses, but since the route had been set for the entire network, the entire /24 network was marked as “allocated” in the system. Due to the peculiarities of the utilization inventory of networks in the Regional Internet Registry (RIR), their distribution cannot be traced deeper than /24, so such a network is considered by the outside world to be fully exploited and thus not recorded in global statistics.

Unsustainable usage of IP resources

It seems that many large companies actually only use 15-20% of the total available address space, even though their networks are considered full. The rest of the IP addresses are as good as dead. It is extremely difficult to correct this situation; optimizing networks by rearranging network nodes scattered across the IT landscape into one network is a global, hard-to-solve problem for any enterprise system. According to reports, there is a shortage of IPv4 addresses, but in reality, there isn’t a shortage at all. There are only organizations that use their IPv4 resources inefficiently and unsustainably.

Possible solutions: “unfreezing”, market places, the state, a global audit & redistribution

“Unfreezing“ unused networks

First and foremost in the sustainability principle, which has recently gained importance in Germany. The first step is to reach out to owners of unused networks to “unfreeze“ their networks and to distribute the unused IP address ranges profitably for the owner. This also makes address ranges available to buyers. The analysis we conducted on existing IP resources revealed that many owners of IP resources did not even know that they owned them.

How to find unused IP networks in an organization is the subject of another article. Here we briefly tell what anyone who has unexpectedly discovered idle networks in their possession can do with them. IP addresses can easily be monetized these days. They can be sold or rented out. For example, an IP network /16 (65,512 addresses) can earn its owner about €30,000 a month when rented out. Many owners of such networks do not know on what treasures they own.

Using market places for unused IP addresses

Special trading platforms for renting IP addresses, so-called, market places can be used effectively. Such platforms exist in the USA, in England, and in China. The only trading platform in the European Union is the German market place Interlir.com, which was developed by our company Interlir GmbH. Using this platform, you can rent out your unused IPv4 resources to those who actually need them.

Involve the state in sustainable redistribution

In our opinion, it is possible to involve the state itself in the process of sustainable redistribution of IP resources. The state could legally support this approach and invite owners who have surplus resources to engage in such redistribution. Furthermore, the participating institutions – owners of IP resources – can save themselves a lot of money for the exchange of equipment. For example, there are already universities in the US that fund their current activities by renting out surplus address space. The release of new address space will have a positive impact on the development of the IT market in Germany and also across Europe and will enable developing as well as already established companies to save considerable funds for the purchase of expensive equipment or new IP address networks on the free market.

A global audit

Another option is to conduct a global audit of the use of address space by universities, government agencies, and corporations and develop a detailed plan to reallocate and consolidate existing IP resources at each audited company – thus freeing up new address space and making it available again. There are only a few companies in the world that have experience in carrying out such audits. It is interesting to note that quite a large number of IP addresses are managed by government agencies, so the state, again, can play a crucial role in this process.

Redistribution of address space

The released address space can also be distributed among all participants in the IP market via  platforms such as Interlir.com. In this case, consumers will be relieved of the need to purchase necessary address capacity from spontaneously emerging IP brokers as well as third-party and foreign companies at implausible as well as sometimes non-market prices. The obvious advantage of using the system for redistribution of address space makes such platforms suitable to be used also at the state level, for example, for market and price regulation of such resources.

Considering that systems like ours offer free access to IP resources to any market participant, they can be used for the development of national as well as cross-state systems of market regulation of the IPv4 protocol in Europe.

Alexey Shkittin is the CFO and co-founder of InterLIR and has more than 15 years of experience in the IT industry. He has founded several IT companies and he is considered to be one of leading experts on the IP networks market.

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