The importance of brokers in the IP address market and how they create value isn’t always obvious to many. While chatting with a person I met at a recent major network technology conference, he expressed his concerns that the presence of brokers in the market was resulting in higher prices for addresses.
His point of view was understandable and is shared by others but it overlooks the various ways brokers actually add value to the market.
So I asked if I could explain how IPv4 brokers improve market outcomes. He graciously agreed, and I proceeded to offer the following three points:
Locate IPV4 Blocks
First, the job of brokers involves digging and mining to locate blocks that have been allocated but are not in use, and bringing them to the address market. This increases supply which actually reduces price according to economics. To do their jobs, brokers trace the history of defunct organizations, cold call into companies to find the person who handles the network and ask about address ranges that are available, and work with Registries’ staff to ensure that there is no fraud in the history of an address block. Therefore, brokers ensure that there is a clean supply of addresses in the marketplace.
Insider to IPv4 Secondary Market
Second, brokers provide valuable information about price that is more reliable than you can get from other means, like posting to the local ‘NOG’ or ‘NIC’ email list to confirm if an offer you received is reasonable. Brokers post data on price that goes back several years and covers hundreds of transactions. By doing this, brokers provide support for those people in organizations who need to make cases for selling or buying addresses. Charts of data on sales of addresses provided by brokers have appeared on many investments memos and have been used to support requests to sell addresses.
Third, brokers simplify the transaction process. From developing relationships with Regional Internet Registries to creating standardized documentation, brokers help save time, and thus money, for buyers. They also provide free escrow services. Many companies trade in the market just a few times. For them, developing in-house expertise is unnecessary and just a waste of resources.
By carrying out the functions mentioned above, IPv4 brokers enable organizations to actually focus on trading and facilitate the process of expanding their networks. Rather than raising the prices of IPv4 addresses, they actually help to bring them down by increasing supply. At the same time, if the prices of addresses was zero, there would be no incentive to mine for unused addresses and facilitate transfers. Since most companies do not want to expend their limited resources to create these capabilities, they’re grateful for the services of a broker.
In the coming years, we look forward to bringing our expertise in the IPv4 transfer market to the networking community and work with them to address concerns as they arise.