Microsoft has agreed to pay $7.5 million to purchase a block of 666,624 IPv4 addresses from bankrupt Canadian telecom equipment maker Nortel in a move that some see as a signal of the increasing value of IPv4 addresses.
Last week, Nortel filed a motion seeking approval for the sale from the Bankruptcy Court for the District of Delaware. If the deal is approved, Microsoft would assume control of the IPv4 addresses, currently owned by Nortel, for about $11.25 a piece.
About 470,000 of the addresses will be available for immediate use by Microsoft, while the remaining amount will be released to the company at the end of the bankruptcy proceedings, according to court documents filed in connection with the proposed sale.
News of the proposed deal comes just weeks after the Internet Corporation for Assigned Names and Numbers (ICANN) announced that it had handed out its last block of IPv4 addresses and that any supplies remaining with regional registries would soon run out.
Some have speculated that a black market for IPv4 addresses will form as their supply begins to wind down and more organisations are faced with the costs and risks involved in a migration to the IPv6 protocol.
ICANN and regional registrars have noted that the remaining IPv4 addresses will go to entities that demonstrate an immediate need for them.
The American Registry for Internet Numbers (ARIN) has put in place new rules that allow companies to forecast their address needs for only three months at a time instead of the previous one year period.
Microsoft's plans to purchase Nortel's entire block of IPv4 address in this environment has prompted some discussion among members of the North American Network Operators' Group (NANOG) .
Some posters on the group's mailing list speculated that Microsoft was buying the addresses in order to resell them at a later date. "They can only get them for free from ARIN if they can document an immediate demand," one poster on NANOG noted.
"Perhaps they don't have an immediate demand and are simply stockpiling addresses for later use post ARIN depletion? Or perhaps they hope to make a profit then by selling them to someone else," the poster noted.
Others wondered how Microsoft could purchase the address block when ARIN polices required that the blocks be returned by Nortel to a common pool where others could use it. One poster noted that the "recipient organisation has to show justified need," in order to get the blocks.
In one post on NANOG, John Curran, the CEO of ARIN, appeared to suggest that the organisation would be willing to go to court to explain IPv4 allocation policy.
"ARIN will indeed administer the policy as adopted and will explain it as necessary in various courtrooms," Curran noted. It could not be immediately verified if the poster was indeed Curran.
Nortel filed for bankruptcy protection in January 2009. Since then the company has been selling its assets in a bid to try and raise money to pay off creditors.
According to court documents, Nortel began attempting to sell the IP numbers in late 2010 after it realised their potential value.
The court appeared to acknowledge the value of IPv4 address when it noted that limited supply of IPv4 addresses offers an "opportunity to realise value from marketing the Internet Numbers, which opportunity will diminish over time as IPv6 addresses are more widely adopted".
Nortel received inquiries from 80 potential buyers and signed non-disclosure agreements with 14 of them as part of its preliminary efforts to find a suitable buyer.
The company received final bids from four purchasers this January and settled on the Microsoft offer in March because it represented the highest and best offer, the court documents noted.
Domain Incite, a blog that covers the domain name space, noted that the $11.25 per address that Microsoft has agreed to pay is more than what one would expect to pay.
"Remember, there's no intellectual property or traffic associated with these addresses - they're just routing numbers," Kevin Murphy, the blog's editor, noted.
Based on that price, the total value of the entire IPv4 address space is in excess of $48 billion, he noted.
Microsoft did not respond immediately to a request for comment.