ARIN Auctions

Is an auction is an appropriate forum to buy or sell IPv4 addresses?  After all, there’s a handful of websites out there purporting to provide an auction-style marketplace for scarce number resources.  The answer, in a nutshell, is that the risks and drawbacks usually make it unviable except in limited circumstances and for small-sized blocks.  What should buyers and sellers consider when weighing this option?

Transparency and Reputation

As a Buyer, you’ll want to know all you can about a netblock before making an offer on it.

What is its routing history and geolocation history?
Was it used for email in the past, and are there any lingering blacklist issues?
Was it ever used by a hosting company or ISP?  (Even reputable ones may have issues if the clients they delegated the IP addresses to weren’t so reputable.)
Was the range ever hijacked?
Is it on a national block list?

 

Most, but not all, auction-style sites allow buyers to know the IPv4 range in advance of bidding.  If a Buyer is sophisticated enough, they can determine some of the above answers themselves, but certainly not all of them.  That requires either direct interaction between Buyer and Seller, or at least interaction through a knowledgeable broker who can shed light on the more opaque issues.

As a Seller, you’ll also want to know all you can about potential Buyers.

Do they understand the justification and approval process of their RIR (Regional Internet Registry)?
Will they know how to navigate their RIR’s transfer process?
What is their payment process?  (Sure, the auction site may post terms of payment, but will the Buyer’s internal procedures allow them to adhere to it?)
How will the Buyer be using the IPv4 space?  Some Sellers may not care, but others may consider this an issue that could reflect on their own reputation.

 

An IPv4 Seller in an auction-style format has no say on who bids on their block.   By using a reputable broker, Sellers have a partner who can help filter out the riffraff and increase the chances that a deal will conclude satisfactorily for all parties.

Participation Level

Sellers may think an auction is a great way to generate interest in their netblock, but when considering the realities of the IPv4 market, auctions provide visibility to only a small subset of buyers.   Most entities don’t have the procedures in place to allow them to bid on a netblock in an IPv4 auction.  They are required to institute a budget, choose a Seller to work with at a specified price, create a purchase order, and execute payment according to established guidelines.  The speed and flexibility that an auction requires doesn’t allow them to participate, eliminating most of the best-funded bidders.

Also, auctions usually last only a few days or a week, which is a problem in the IPv4 market where timing is everything.  Perhaps the Seller will catch lightning in a bottle and find a good Buyer who happens to need the size block being sold at the right time.  More often, however, patience is required to find a good trading partner willing to pay the best price.  The IPv4 market is not very liquid, and an experienced broker who interacts with many buyers and sellers over time can best match up a Seller with a good Buyer.

Contract … or lack, thereof

A reputable broker will help buyers and sellers craft a contract that explicitly lays out the details of the transaction, including the representations of both parties, indemnifications and liability, and the legal recourse both sides have in case problems do arise.  This contract is an invaluable tool in proving ownership of the netblock when using it or, perhaps, subsequently selling it.

Don’t expect a contract between Buyer and Seller on an IPv4 auction sale.  There may be terms and conditions involved in entering the auction process, but that is mostly for the legal protection of the auctioneer.  If something goes wrong down the road, what protections and recourse do the parties have?  Without a contract in place, very little.

Don’t be Fooled by the Prices

The asking prices at IPv4 auctions don’t always reflect current market pricing.  In fact, most prices posted include a hefty fee levied by the auctioneer, so it may indicate what a buyer has to pay, but not what a seller can expect to receive.   Check the fees out in advance, if you can.  This may not be easy to find on the auction site, and there’s a reason for this.

Plenty of IPv4 auctions end with no bids at all, indicating the netblock was posted at the wrong time or that there just aren’t enough bidders to create a true marketplace in an auction-style format.  And, as with any auction, beware of shills or fake bids used to artificially drive up the price of the asset.

Every Buyer and Seller in the IPv4 market has specific and, ofttimes, unique requirements.  A good broker can help put together a deal that works for both parties, without forcing either side into a cookie-cutter process that’s lacking in transparency, market penetration and contract enforceability.