How Romania's patchwork Internet helped spawn an IP address industry

The onetime Communist country has become the place to go in Europe, Russia and the Middle East for IPv4 (Internet Protocol version 4) addresses, which were free and easy to get until the Internet grew as big as it has. New rules expected later this year may see address-hungry users in Asia and North America turning to the Romanians, too.

The roots of the Romanian IP address trade lie in the country's peculiar Internet history. When commercial Internet service began in Romania around 2000, it was totally unplanned and unregulated. People started ISPs by pulling cables from one house to the next.

"The center of Bucharest was a mesh of wires for many years," said Elvis Velea, the Romanian-born CEO of global IP address brokerage V4Escrow. (Yes, Elvis' company is based in Las Vegas.)

Soon a few bigger players started buying out the many small ISPs (and burying the wires), but they didn't use the old IP addresses. Instead, they got fresh addresses from RIPE NCC, the regional Internet registry (RIR) for Europe, Russia and the Middle East.

That left a lot of unused IP addresses floating around Romania, which meant nothing until 2012, when RIPE and others recognized that IPv4 addresses were becoming a scarce commodity. Suddenly all those old numbers had value.

Also, for years many companies and organizations in Romania didn't know how to request IP addresses from RIPE, so they let someone else register the addresses and lend them out, Velea said. Come 2012, the owner of those addresses had a valuable asset. It became a company called Jump Management, which is still responsible for many of the sales and leases of Romanian IP addresses across Europe and the Middle East.

Out of all this grew an industry of investing in and selling IP addresses, Velea said. Some Romanian companies now buy addresses from one country and sell them in another, either working through a broker or going it alone, Velea said.

"The guys there have understood the system, so they're basically working it and making a profit out of it," he said.

RIRs gave out big blocks of fresh IPv4 addresses for years until they started running out. Now the RIRs assign them much more carefully while keeping track of all the addresses that are already in use. But as long as all transfers follow the regional rules, the registries don't mind if money changes hands.

Recent transfers within RIPE have come from myriad sources including a Finnish hosting company, a Greek technical institute, and a Turkish collocation center. But Romania's Jump is a recurring character, and addresses frequently have gone to users in the Middle East.

The market for reassigned IPv4 addresses is growing in Europe and the Middle East, according to Dyn Research, which monitors the state of the Internet. Using information collected by RIPE, Dyn found that 1,848 blocks of addresses were transferred between Jan. 1 and March 30. The number of blocks transferred per month has grown significantly over the past year, according to Doug Madory, director of Internet analysis at Dyn.

Of those 1,848 address blocks transferred earlier this year, 58 percent came from Romanian organizations, according to Dyn. Jump Management alone was responsible for 51 percent of them. A lot of these addresses are ending up in the Middle East: About 5 percent of all the IP addresses in use in Saudi Arabia were registered in Romania just a few months ago, Madory said. In the past year, Romanian providers have also transferred addresses to the Syrian state telecommunications carrier and an Iranian service provider, he said.

The Middle East's demand for IPv4 addresses may have roots in the region's own late start on the Internet. In the 1980s and 1990s, IPv4 addresses were available to anyone who asked, but you had to ask. Middle Eastern companies and carriers may not have seen the need in time, Velea said.

To hear Velea talk, IPv4 is a thriving business. The price of one IPv4 address had been hovering around US$10-$11 over the past year, but it's inched up to a minimum of $12 as supply has dipped, he said. RIPE is expected to soon start allowing transfers outside its region, including with organizations in North America and the Asia-Pacific region, which should lead to even more activity, Velea said.

Transfers between RIPE's region and North America may start later this year if RIPE approves a rule change that would make its policies compatible with those of ARIN (American Registry for Internet Numbers), said Richard Jimmerson, ARIN's chief information officer. A key step will be to require that recipients prove they actually need the addresses. ARIN has already imposed such a requirement in North America to prevent hoarding, he said.

A complicated task like transferring IP addresses does have its risks. In some cases, it seems that not everyone's gotten word that a block has been transferred, Dyn's Madory said. If different routers give different directions, not all the traffic to a given address will get to the right place. Those mix-ups are rare but might increase as the number of transfers grows.

There's another way to keep adding users and devices if your IPv4 addresses run out. IPv6, already in use in some parts of some networks, has an almost unlimited number of addresses. But because most people still use IPv4, the older protocol is a safer bet for making sure users can reach your website or service. There aren't many needs forcing IT shops to adopt IPv6, so even big ones like the U.S. Department of Defense have held back.

Stephen Lawson covers mobile, storage and networking technologies for The IDG News Service. Follow Stephen on Twitter at @sdlawsonmedia. Stephen's e-mail address is stephen_lawson@idg.com