IPv4 Address Leasing:
Ownership Rights and RIR Policies
by Leo Vegoda
Selling IPv4 blocks for immediate financial gain is a popular monetization choice for many enterprises, but companies with surplus, unused IPv4 addresses can use them for long-term revenue via IPv4 leases instead. Unlike selling IPv4 addresses and relinquishing ownership rights to these addresses, leasing them on the market enables organizations to “lend” these ownership rights to lessees.
In general, leasing arrangements are subject to the regulations stipulated by regional internet registries (RIRs), the entities responsible for overseeing regional distribution of IPv4 addresses. Understanding how IPv4 address leasing works, including the legal framework for managing ownership rights, will help any organization smoothly lease these addresses in a competitive market.
IPv4 Address Leasing Fundamentals
IPv4 leasing is an agreement between two parties where the lessee “rents” IPv4 space from a lessor without the lessor transferring ownership rights to the leased addresses. The lessor is like a landlord and the lessee is like a tenant.
Many lessor companies choose to lease their surplus IPv4 addresses rather than sell them due to uncertainty regarding long-term network expansion needs. So, a company that currently holds a stockpile of IPv4 addresses but anticipates significant growth in a few years may decide to lease them until there’s an actual future need for the addresses. Other companies may simply prefer recurring operating income over a one-time capital event.
Similarly, a lessee with limited capital may prefer leasing IPv4 addresses, which provides flexibility and avoids the upfront capital commitment required when purchasing hundreds or thousands of these addresses.
IPv4 Address Leasing Ownership Rights
In the IPv4 trading world, “ownership” means an organization owns the rights to a set of IPv4 addresses but does not necessarily own the addresses. Each IP address is a unique identifier that can only be attributed to a single entity, meaning whoever owns the rights to a block of IPv4 addresses is recognized as the registered “owner.”
Understanding how these ownership dynamics work is critical when lessors partner with lessees to develop a leasing contract for IPv4 space. For instance, without permanent rights to a block of IPv4 addresses (as with a lease), companies do not have network autonomy, meaning they lose any rights to these addresses when the lease ends. Any network operations that fully rely on the leased IPv4 addresses will need to be renumbered.
Likewise, lessors typically set specific parameters to govern the use of IPv4 addresses during a lease, such as requiring a lessee to comply with the policies established by the respective RIR overseeing the distribution of internet resources in that region. Most often, lessors will prohibit email or other illegal activity, since a bad reputation can prevent the addresses from being used later, and give the lessor a bad reputation.
RIR Policies on IPv4 Leasing
Regional internet registries (RIRs) are the organizations tasked with managing the distribution of internet number resources such as IPv4 and IPv6 addresses.
The five RIRs and their respective regions include:
- American Registry for Internet Numbers (ARIN), which covers United States, Canada, many Caribbean and North Atlantic islands
- Latin American and Caribbean Internet Addresses Registry (LACNIC), which covers Latin America and the Caribbean
- Réseaux IP Européens Network Coordination Centre (RIPE NCC), which covers Europe, the Middle East and parts of Central Asia
- Asia-Pacific Network Coordination Centre (APNIC), which covers Asia Pacific
- African Network Coordination Centre (AFRINIC), which covers Africa
In alignment with the local regulations of the countries and regions in which they are located as well as the communities they serve, RIRs establish and implement policies to govern the proper use of internet number resources. This process typically involves justifying the need for organizations to acquire IPv4 addresses and ensuring these addresses are assigned to unique entities so the internet functions smoothly.
RIR policies often seek to make sure addresses are available to new and growing networks. They therefore usually make it harder to stockpile addresses by requiring acquiring organizations to show how they will use the addresses, or why they need them. This means an organization cannot use their leased-out addresses to justify the acquisition of more address space. The exception is RIPE NCC, which does not require justification. Organizations that have a surplus of addresses from years ago generally may lease out their addresses.
IPv4 Leasing Economic Implications
Between 2021 and 2023, the price per IPv4 address ranged anywhere from $30 to $50, indicating the volatility of the market. Although these IPv4 market dynamics can help estimate leasing trends and influence buying vs. leasing decisions, the decision to lease or buy IPv4 addresses ultimately comes down to an organization’s specific needs.
For example, companies with clear long-term network expansion plans and capital available to finance these plans are better off buying IPv4 addresses, especially when the market pricing is favorable. On the other hand, a company that’s unsure how fast it will grow and whether it needs significant network space should ideally lease these addresses to determine if a purchase is more practical down the line.
On the lessor side, it’s profitable to lease out IP addresses if an organization does not plan to use them soon. Sometimes, spammers looking to lease IPv4 blocks may attempt to take advantage of lessors, who may be caught unaware. To avoid the impact of such unfavorable scenarios, lessors can work with experienced IPv4 brokers like IPv4.Global, who review potential lessees and monitor leases in progress.
Challenges and Risks in IPv4 Leasing
Navigating the IPv4 leasing market can also be challenging for both lessees and lessors.
In many instances, violations of RIR policies via non-compliance can impact the relationship between the RIR and a lessor, which can affect future transactions involving the trading or transfer of IPv4 addresses by the lessor. For example, a lessee that violates the terms of a leasing contract can damage the reputation of a lessor, who would then be tasked with repairing that damage with the RIR, resulting in legal and financial costs.
On the lessee side, it can be challenging to determine the reputation of IPv4 blocks one chooses to lease without conducting significant due diligence.
With network audit tools, companies can determine whether the addresses they are leasing were sitting dormant for extended periods of time or if the networks were unmonitored and prone to security risks. A good example is ReView, IPv4.Global’s IP address audit tool, that inventories IP address allocations and assignments so an organization can understand the nature of IP addresses it’s leasing.
The Future of IPv4 Address Leasing
The IPv4 leasing market is poised for growth in the coming years, especially after Cogent’s securitization of IPv4 leases for $206MM.
Although IPv4 scarcity has driven up the demand for these addresses, the growth and adoption of newer IPv6 technology is helping to meet the unsatisfied demand. Organizations may be able to lease IPv4 addresses for a few years while deploying IPv6 and need fewer IPv4 addresses when the lease ends.
IPv4 Leasing and Ownership Recapped
Choosing to lease or purchase IPv4 addresses will help meet any organization’s network expansion needs. Finding the right information to guide these decisions will help streamline the entire process, particularly on the legal side. Understanding how IPv4 ownership rights and compliance with RIR policies affect the IPv4 leasing market helps organizations prepare for leasing agreements more effectively.
Whether one is a lessor or lessee, it helps to identify the requirements for a successful lease agreement, such as usage stipulations, the impact of ownership rights on a lease, the role of IPv4 market trends on lease pricing, and the end-to-end risks and challenges.
Ultimately, finding a reliable and trusted source of information on IPv4 leasing will help your company make the right decision. At IPv4.Global, our experience as trusted marketplace brokers enables us to find the right IPv4 addresses for your needs. Whether you choose to lease these addresses or buy them, our team can walk you through the considerations of either option.