IP Leasing: How IPv4 Leasing Benefits Telcos
Telecommunication companies need IPv4 addresses to operate their services. Discover why telcos choose IP leasing as a way of obtaining resources.
Telecommunication companies, or telcos, are telecommunication providers that make global connections possible with the help of the Internet Protocol (IP), the standard data transmission protocol. Unfortunately, IP addresses – numeric identifiers for internet-connected devices – are scarce these days. As a result, many telcos lease IPv4 addresses.
IPv4 leasing is not the only option offered by the current IPv4 market. Businesses that need IP addresses can also choose to buy the resources they need. However, with IPv4 exhaustion at our doorstep, buying these assets might not be the most optimal solution.
The question is, can leasing be more beneficial than buying? If so, what benefits does IPv4 leasing unlock for telecommunication companies? Before we get to that, let’s look at why we need IP leasing at all.
What is IP leasing?
A rising number of Internet of Things (IoT) devices has significantly accelerated the use of available IP resources. Also, the growing number of up-and-coming businesses need new IP addresses to scale their operations. The problem is that we no longer have our 4.29 billion IPv4 addresses. Fortunately, IP leasing emerged as a response to this global problem.
Buying IP addresses is also an option, but it is not a sustainable one. Why? Mainly because it is too expensive, complicated and time-consuming. While the price per IPv4 address was $5-10 a decade ago, today one IP address can cost up to $60. The prices are rising because the demand is much bigger than the supply.
As you may know, during the allocation of IPv4 in the late 80s and early 90s, no one thought about the depletion of this resource. Internet’s sustainability was not a priority back then either. In fact, large organizations received pools of IPs so large that they could not even utilize them properly.
These originally allocated resources are also referred to as the IP legacy space. These are the IPv4 addresses that were distributed before the emergence of Regional Internet Registries (RIRs). It was only in 1992 that the Internet Engineering Task Force (IETF) suggested establishing RIRs to ensure a more efficient IP resource management on a regional level.
Once the depletion of IPv4s became evident, RIRs started encouraging large corporations to return unused resources, and they were successful to some extent. According to Geoff Huston, Chief Scientist at Asia Pacific Network Information Centre (APNIC), the available pool of IP addresses, including those retrieved from the legacy space, comprised 5.2 million addresses across all RIRs at the end of 2021.
Even though RIRs managed to move a portion of unused resources back into the general pool, that is still not enough to fully satisfy the current demand. This created a need for a well-managed IP lease market.
How can telcos benefit from the IPXO IP leasing platform?
Nowadays, the telecommunication industry makes communication available via multiple different technologies. Thanks to the infrastructure of these companies, we can send audio, video and voice data anywhere in the world.
For example, telephone companies use voice over IP (VoIP) technology that converts voice calls into data packets and sends them over the internet. VoIP does not work without the internet since it is based on the IP as a standard communication protocol.
In addition to sophisticated data transfer technologies, telcos can offer more diverse communication services. For example, some telcos can even function as ISPs to provide email or hosting services.
Naturally, the growing number of services and expansion of networks increase the demand for new IP resources. However, the finite supply of IPv4 can no longer meet the demand.
Luckily, IPv4 leasing can help alleviate the growing demand. Leasing may unlock several benefits for telecommunication companies, including quicker expansion and cost-efficiency. Let’s investigate these advantages further.
IPv4 leasing is a quick fix for growing business
IPv4 leasing providers ensure access to the resources telcos need much faster than if they were to buy them. If there is a need for new IP addresses, companies can lease them via the IPXO Marketplace in just a few days. In contrast, purchasing is a long process that can take up to several weeks.
With the help of the IPXO platform, companies can lease IPs from all RIRs. Additionally, the geolocation feature allows filtering IP addresses to find the best suitable geolocation for the company’s needs.
Another leasing benefit is that long-term commitment is not always required. This means that companies can lease IP addresses for as little as 12 months and renew the contract if need be.
IPv4 leasing is a cost-efficient solution that mitigates the global IPv4 shortage
In addition to faster acquisition of resources, IPv4 leasing can also save costs. And, if companies save money, they can spend it on other crucial investments.
Paulius Judickas, VP of Strategic Sales at IPXO, compares the IP purchase and lease prices:
According to Judickas, for companies that choose to buy IPs, the investment pays off after approximately 100 months, compared to the 40-month payback period we could observe just a few years ago. And this number is likely to grow even further.
Huston predicts that the IPv4 cost will further escalate and encourage more effective use of IPv4 addresses. According to Huston, the rising price clearly indicates the fundamental value of IPv4.
Could the IPv4 market collapse if prices continue growing further? Huston believes that this is a probable scenario. If it comes true, those who have purchased IPv4 addresses will be left with a valueless asset. Therefore, leasing may be a better option in the long run.
Leasing adds more flexibility to budget management
Judickas points out that companies don’t have to invest a lot of money upfront when leasing IP addresses. With leasing, companies can save on capital expenditure (CAPEX) and shift focus to operating expenses (OPEX).
In other words, instead of spending important capital on a specific number of IPs at once, companies can choose to lease some of the addresses for several months. This is convenient as companies can more optimally plan the budgets needed for a certain number of IP addresses.
Furthermore, leasing may offer additional flexibility. Companies can increase or decrease the number of leased IP resources as needed. And if companies decide to lease IPv4s for a longer period, some IP lessors might offer a lower price.
That said, if companies decide they no longer need the addresses, they can stop leasing without experiencing significant losses.
IPv4 resource monetization as a recurring income
If large telcos have unused IPv4 addresses, they can enjoy another side of IP leasing – they can monetize their resources.
Leasing IPv4 addresses via the IPXO Marketplace can also help optimize resource management. How? IPXO performs thorough Know Your Customer (KYC) checks on all IP lessees and employs IP reputation monitoring and automated abuse prevention tactics so that IP holders could rest assured that their IPs are safe.
The best part is that IPXO contributes to the sustainability of the internet by ensuring a more efficient use of available resources. Therefore, new and scaling businesses can safely acquire the assets they need. Meanwhile, large companies can unlock a new source of income instead of abandoning a large pool of unnecessary resources.
A win-win for all
In the wake of IPv4 depletion, companies no longer have the luxury of getting all the IPv4s they need. So, what should telecommunication companies do if they need new resources for their infrastructure?
Not many options exist in today’s market. In fact, most companies choose between two: buying or leasing IPv4 addresses.
Telcos of all sizes can benefit from IPv4 leasing because this solution offers lower upfront costs and fast resource acquisition. Moreover, leasing can help boost up-and-coming businesses.
IPv4 leasing can also help save money because purchasing IP resources is expensive, whereas leasing does not require high upfront costs. Savings, in turn, allow investing elsewhere.
Ultimately, the IPXO Marketplace clears the path to more efficient business for both small and big telecommunication companies alike and a more sustainable internet for all.
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