We consider market rules for transferring IP addresses, numeric identifiers required by all computers connected to the Internet. Transfers usefully move resources from lowest- to highest-valuation networks, but transfers tend to cause socially costly growth in the Internet’s routing table. We propose a market rule that avoids excessive trading and comes close to achieving social efficiency. We argue that this rule is feasible despite the limited powers of central authorities. We also offer a framework for reasoning about future prices of IP addresses and then explore the role of rentals in sharing information about the value of IP address and assuring allocative efficiency.

Every device connected to the global Internet needs a numeric identifier, an “Internet Protocol” address (“IP address”). The Internet’s continued growth presents a challenge: most IP addresses have already been assigned to networks and organizations, leaving few left for newcomers and growth. In this context, some networks seek to sell the addresses they previously received–sales that can usefully transfer resources to the networks that most need them, but with certain risks that must be handled with appropriate care. We examine the legal basis of applicable rights and identify the circumstances in which such transfers are permitted.

Bankruptcy trustees, debtors-in-possession, and receivers are seeing an increase in efforts to sell Internet Protocol (IP) addresses, also referred to “IP Numbers.” IP Numbers are the unique numeric identifiers associated with computers connected to the Internet. While sales of IP Numbers can deliver value to the estate, IP Numbers are unusual in that their value, use, and transfer are enhanced by applicable contract and policy. Ignoring the contracts and policies can delay the sale process and reduce or negate the value of IP Numbers. This article seeks to provide an overview of issues associated with IP Number sales, as well as suggesting an approach for permissible and straightforward sales to obtain the highest value.

The Internet’s current numbering system is nearing exhaustion: Existing protocols allow only a finite set of computer numbers (“IP addresses”), and central authorities will soon deplete their supply. I evaluate a series of possible responses to this shortage: Sharing addresses impedes new Internet applications and does not seem to be scalable. A new numbering system (“IPv6”) offers greater capacity, but network incentives impede transition. Paid transfers of IP addresses would better allocate resources to those who need them most, but unrestricted transfers might threaten the Internet’s routing system. I suggest policies to create an IP address “market” while avoiding major negative externalities–mitigating the worst effects of v4 scarcity, while obtaining price discovery and allocative efficiency benefits of market transactions.

Disclosure: I provide advice to ARIN’s counsel on matters pertaining to v6 transition, v4 exhaustion, and possible revisions to ARIN’s v4 transfer policy. But this paper expresses only my own views – not the views of ARIN, its Board, or its staff. I write on my own behalf, not for ARIN, nor at ARIN’s instruction or request.

More than 87% of active domain names are found to share their IP addresses (i.e. their web servers) with one or more additional domains, and more than two third of active domain names share their addresses with fifty or more additional domains. While this IP sharing is typically transparent to ordinary users, it causes complications for those who seek to filter the Internet, restrict users’ ability to access certain controversial content on the basis of the IP address used to host that content. With so many sites sharing IP addresses, IP-based filtering efforts are bound to produce “overblocking” — accidental and often unanticipated denial of access to web sites that abide by the stated filtering rules.