In the tech world, IP addresses are like digital real estate. Just like the urban sprawl problem in the physical realm, the IPv4 realm is becoming increasingly crowded. There are only a limited number of these 32-bit Internet IDs, and as our online business continues to expand, demand far exceeds supply.
Amazon Web Services (AWS) launched a new IPv4 address pricing plan on February 1, which it had announced several months ago. The new policy means customers will pay $0.005 per hour per public IPv4 address, a figure that may seem insignificant at first glance. But dig deeper, and you'll find a multi-billion-dollar revenue stream emerging from Amazon's cloud computing division.
The tech giant first previewed the price change last summer, positioning it as inevitable amid soaring demand and management costs for IPv4 addresses. After all, the number of unique IDs for 32-bit protocols has reached approximately 4.3 billion. That may sound like a lot, but in an era of proliferation of smart devices, we’re running out of resources.
As IDs are depleted, the associated costs are soaring. "The cost of obtaining a public IPv4 address has risen more than 300% over the past five years, and it urges users to transition to IPv6 with its massive 128-bit address pool," the company said.
But IPv4 is still widely used, and Amazon holds a large number of sought-after addresses. Analysis by Border0 estimates that Amazon controls nearly 132 million public IPv4 addresses. Border0 crunched the numbers and found that their valuation is eye-popping -- about $4.6 billion at the current average IPv4 price of $35.
Of course, Amazon can't simply cash out and offload Internet real estate; it can generate recurring revenue by charging active users. Border0 estimates that 30% of these IPs (79 million) are associated with revenue-generating AWS services. By doing some quick math, Amazon could gain over $1 billion in expected revenue per year from this policy change. Border0 concluded that Amazon could earn between $400 million and $1 billion in annual revenue through the new pricing policy.
The price turmoil highlights profound changes in internet infrastructure. Managing this limited resource pool is becoming increasingly tricky and costly. Meanwhile, the advantages of IPv6 (besides its galactic address count) include alleged speed increases and security improvements.
For example, an old blog post from Meta (then Facebook) claimed that IPv6 optimization made their site 10-15% faster. If implemented properly, the new protocol also prevents common IPv4 vulnerabilities. However, as of 2023, IPv4 is still widely used around the world, although its address resources are close to exhaustion.
So while some may bash the price increase, Amazon's carrot-and-stick approach could ultimately push laggards to adopt IPv6, paving the way for an Internet without address shortages.