The Rising Cost of the Humble IP Address
Prices of public address have increased for a long time, but only recently have they reached a cost which could trigger wide-spread adoption of a different standard
Hi Friends!
In this article I go over the history, the engineering used to optimize & why IP address prices have continued to rise with no end in sight:
Overview of addressing & the IPv4 and IPv6 standards
How addresses have historically been allocated and traded
Why current market costs are reaching an inflection point
How IPv6 saves the day
Header: Location
Every node on the public internet is represented with an address. Much like the postal system, your mail is destined to a location with routing occurring before delivery.
The address space used for IPv4 (The incumbent standard) is a 32 bit field made up of 4 octets (1.2.3.4) which gives us 4,294,967,296 unique addresses.
There are currently (as of writing) 8 billion people on earth. Not all of them have internet-addressable devices, but many of them have multiple. Every publicly accessible system in the world also needs to be addressed. Addresses in the same domain must be unique, the public-internet is considered one big domain.
Can you see a problem arising?
In-fact… the clever engineers behind the IPv4 standard foresaw the inevitable IP exhaustion problem and decided to address it, with a brand new standard called IPv6.
IPv6 solves the space problem by expanding the field to 128 bits, giving the world a whopping 340,282,366,920,938,463,463,374,607,431,768,211,456 addresses to utilize on their journey to encircling the earth with digital devices. So why don’t we just use that?
As Usual, It’s Complicated
In the early days of the internet IPv4 addressing organically took hold as the internet’s standard. There was no immediate pressure on anyone to do anything different & the growth rate and size of the internet was uncertain at the time.
IP addresses (blocks) were handed out like candy. Massive chunks of publicly addressable space were leased to businesses and organizations by The Internet Corporation for Assigned Names and Numbers (ICANN).
Companies like Amazon, HP, Microsoft along with government entities like the DOD were assigned entire “slash eights” (denoted as “/8”). This means the entity is in control of 16,777,216 publicly addressable IP’s. At the current market rate of approximately $50-$55 per IP (for larger blocks) it values this asset at figures approaching $1 Billion.
There is some interesting history around why some of these early assignments were so wide. The early strategic thinking from these large entities was that every system on their private network would eventually require a (public) IP address in order to chat to other nodes on the internet. That thinking soon gave way to the more secure idea of segregated private & public network domains, which were divided up by address translation (NAT) gateways. This resulted in orgs using private addresses (those defined in RFC1918) behind the firewall, and a limited subset of public-facing IP’s which act like a “front-door” to the thousands of private systems hidden inside.
This methodology meant that many networks could condense their total system’s address usage down by a large factor using clever routing / mapping; a single public IP can be used to represent thousands of services behind the firewall.
Still, Prices Keep Rising
Even with practices like NATing, the increase in personal devices and the advent of cloud hosting has meant that IP’s are more in demand than ever. Prices have steadily increased (records are from the time an address marketplace was established) to 2020, after which they almost doubled in price, with a moderate decline to the present. Ignoring the short-term fluctuation, It’s clear that long-term trend is on the rise.
Do you have any ideas on what drove this short-term fluctuation? Post your ideas in the comments!
With prices moving like this, let’s just say those who bought more than what they needed early on are laughing while those who are expanding are looking down the barrel at prices approaching half-a-million dollars for ~8000 IP’s.
Costs are finally being passed on to the customer…
Say you’re an AWS customer, with 1000 public IP’s in your pool which is ~90% utilized, your IP’s cost ~$4,000 a year. Not great, but affordable.
The February 2023 price to rent an AWS IPv4 IP is $44USD per year. New changes mean that ALL your reserved IP’s are being billed, all the time.
This becomes a $44,000 yearly IP address cost. You will never own these… each year you pay this fee, and your business is only likely to need more with time, and It’s conceivable cloud companies will raise their prices in the future.
Something’s Gotta Give
It’s only when global warming threatens to wreak abject havoc on the globe, that we look back at inventions from the 1800’s and wonder if they’d be more relevant than the smoke-machines we’re engineering today.
It’s only when an IP address costs us $44 a year that we take a look at a spec written in 1995 and wonder, could it finally be applicable?
As the cost of doing things the old way grow beyond the cost of an upgrade, the upgrade becomes more attractive.
The reality is; the maturity and adoption of the incumbent protocol is so far-reaching & deeply entrenched at many layers; human thought processes, security guardrails, best practices & implementations in hardware and software.
It’s a mammoth undertaking, but with everyone feeling the pinch, and a strategic drive from the big cloud providers we believe the catalyst for a global shift toward IPv6 could be upon us.
V6 - It’s Not a Car Engine
IPv6 adoption is going to take some time and effort. The stage is now set for businesses to re-allocate engineering resources at migration efforts to reduce their ongoing infrastructure costs.
With various entities working in concert to adopt, test and refine these efforts, its adoption might accelerate very quickly.
- Daniel Korel
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