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A Coming Real Estate Crunch On The Net


During the lean years of the dot-com bust, computer networking consultant Robert B. Antia resorted to bartering with failing companies. He would offer his expertise in exchange for an arcane asset: their Internet Protocol addresses (such as 192.168.1.1.), which enable computers, cell phones, servers, and other devices to send packets of data to other devices across cyberspace. Someday, he figured, this finite resource might become valuable.

That day seems to be here. With millions of new computers, cell phones, and other devices going online every month, the supply of Internet Protocol (IP) addresses is growing scarce. With only 4 billion number combinations possible, an Internet registry group estimates that the 1 billion remaining unallocated addresses will run out by 2010. Familiar net addresses, such as www.businessweek.com, are just human-friendly names with numerical equivalents that enable one device to find another online. Migration to an upgraded version of the Internet, which would allow access for billions more devices, is moving too slowly to stem the looming address shortage.

Some believe this could add up to a gold mine for so-called legacy address holders, those who scooped up hundreds of millions of addresses at the dawn of cyberspace. They were doled out liberally by a handful of academics and government contractors before the commercial potential of the Internet--and the rules governing it--was clear. Those legacy holders range from little guys such as consultant Antia to a few huge corporations that hold many millions of addresses apiece. Because they were given control of IP addresses before the creation of Internet governing authorities in the 1990s, they aren't bound by the same contractual requirements as companies and individuals who lease their IP addresses from the Internet registries. That includes the obligation to make full use of any addresses.

What's not clear, though, is whether legacy holders can legally sell the addresses. The American Registry for Internet Numbers (ARIN), one of five nonprofits that were handed stewardship of cyberspace, says holders should be obligated to turn over any unused addresses.

Today, the vast majority of Internet users--including most companies, Internet service providers, and universities--lease address space from ARIN and the other registries. Leasing fees vary by region; ARIN, which governs Canada, the U.S., Latin America, and the Caribbean, charges from $1,300 per year for a small block of numbers to $18,000 for several million; the biggest users can pay tens of thousands of dollars a year for their space. Already, a market has sprung up for unauthorized sales of addresses issued through the registries. Some numbers have even shown up on eBay (EBAY).

ARIN has begun a campaign to cajole legacy holders into depositing their unused addresses in the public pool. "There's a moral imperative here," argues ARIN General Counsel Stephen M. Ryan, a partner with the law firm McDermott Will & Emery in Washington, D.C. Legacy holders "have a duty to think about the community's interest as well as their own."

JUST-IN-CASE STRATEGY

That's meager incentive for address holders. Transferring big blocks of numbers, even if they're not being used, takes time and tech resources. And there's no economic reason to voluntarily submit to ARIN's rules. Most corporate legacy holders contacted for this story--including Apple (AAPL), Hewlett-Packard (HPQ), and General Electric (GE)--did not return calls or declined to comment. In an e-mail, Halliburton Co. (HAL) spokeswoman Zelma Branch says that although its more than 17 million addresses aren't always used at any given moment, "the trend today is to assign IP addresses to more and more devices." As more individuals hit the Internet with new gadgets, service providers need more addresses. Halliburton intends to hang on to the ones it holds, Branch says.

Despite a couple of offers, Antia says he has resisted selling his addresses. He has even retu rned some to ARIN, swayed by the registry's appeal. Others aren't so altruistic. Internet pioneer Karl Auerbach, a former member of the board of Internet Corporation for Assigned Names & Numbers, which manages domains, says he isn't inclined to sell the "obscene numbers" of addresses he has accumulated. He sees nothing wrong with doing it, though, if he can sort through the legal thicket: "It's like sitting on property with oil under it, but nobody knows how to drill."

By Lorraine Woellert


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