U.S. Department of Defense
IPv4 Address Space

Startling news a couple of weeks ago as everyone learned that the bill in the House of Representatives to fund the Department of Defense contained the following provisions:

• IN GENERAL.—Not later than 10 years after the date of the enactment of this Act, the Secretary of Defense shall sell all of the IPv4 addresses described in subsection (b) at fair market value. The net proceeds collected from a sale under this section shall be deposited in the General Fund of the Treasury.
• DEADLINES FOR CERTAIN BLOCKS.—Of the IPv4 addresses described in subsection (b), the Secretary of Defense shall sell in accordance with paragraph (1)—
  • One block referred to in such subsection, or an equivalent number of IPv4 addresses, by not later than two years after the date of the enactment of this Act; and
  • One additional such block, or an equivalent number of IPv4 addresses, by not later than three years after the date of the enactment of this Act.
  • IPv4 addresses.—The IPv4 addresses described in this subsection are all IPv4 addresses assigned to any agency or entity of the Department of Defense, including all addresses contained in blocks 6.0.0.0/8, 7.0.0.0/8, 11.0.0.0/8, 21.0.0.0/8, 22.0.0.0/8, 26.0.0.0/8, 28.0.0.0/8, 29.0.0.0/8, 30.0.0.0/8, 33.0.0.0/8, 55.0.0.0/8, 214.0.0.0/8, and 215.0.0.0/8.

The measure did not exist in the Senate version, and the conference committee withdrew it, so the final version does not include the measure.

Disposal of IPv4 addresses
The House amendment contained a provision (sec. 1088) that would require the Department of Defense to sell several blocks of internet protocol version 4 addresses over a period of ten years. The Senate bill contained no similar provision. The House recedes.

It’s an interesting point to consider, though. What would happen if the US DoD divested of all of its IPv4 addresses?

Seemingly, the addition of multiple /8 blocks would increase available supply and thus lower prices. In 2019, some 37 million IPv4 addresses were transferred, excluding those noted as merger and acquisition. Another 16 -32 million in supply (up to 2 /8s) would be expected to bring prices down.

Large blocks and small blocks trade at similar prices, but there isn’t a perfect correlation. Ever since the launch of the IPv4 online marketplace in 2014, Hilco has published prices for blocks transferred there. This has affected all portions of the market, as IPv4 buyers and sellers can see recent prices for IPv4 address blocks. However, blocks of /16 and larger have not been traded on the platform, but by private transactions.

Large buyers in particular prefer large aggregate blocks, rather than many medium-sized blocks. Where once there was a discount for large aggregate blocks (/9 – /14, roughly) now they trade at a premium, because it’s easier for a large address holder to manage. If one or two of the largest buyers were to buy all of one DoD /8, it would probably mean that they were satisfied for a year or so, and there would be less competition for blocks large than /14. The demand for /16s and below, however, is more widely distributed, and might well remain unaffected.

A sudden supply of thirteen /8s, however, would be six years’ worth of supply all at once. There is unlikely to be enough demand to support that much space in very large aggregates, so in order to meet the deadlines, it might have to be further divided in /16s and probably smaller blocks.

One more interesting aspect of the bill was the requirement for the Secretary of Defense to report to Congress within 180 days “(D) The plan of the Secretary to transition all Department addresses to IPv6.” In order to make all of the /8s available, the DoD would have to migrate completely to IPv6. That would create huge demand for IPv6 transition to be complete within ten years. It’s a large enough move that it might provide a de facto transition date. Organizations buying IPv4 addresses to meet long term needs might reduce their buying horizon proportionately; that is, they might buy less.

Since the measure did not survive conference, we won’t know in 2020. It could reappear in next year’s bill. How should IPv4 sellers interpret this? Organizations waiting to time the top of the market may find that the time has come. IPv4 buyers making large, long-term buys may want to make shorter term purchases and defer the rest for a year to see if prices come down. We will continue reporting pricing trends in our blog and listing pricing for all transactions made through our online IP market place. Predicting the future is a dangerous business, and trying to time the market is usually considered a fool’s strategy.