For the past few decades, there’s been a relatively straightforward narrative on the economics behind the IPv6 transition that goes something like this: sooner or later, IPv4 scarcity will drive costs up until they exceed those of deploying IPv6. A competitive market will then make the rational choice and transition to a more efficient mode of production and deploy IPv6. This is textbook economics, and—with the disclaimer that I’m not a trained economist—it appears to be incorrect.

Before we look at what’s wrong with this, let’s examine some of the baseline facts, starting with what underpins it all. IPv4 allows for a maximum of 4.2 billion unique addresses which, after some technical constraints and reserved blocks of addresses, leaves around 3.7 billion addresses which can be used on a global and unfragmented Internet. This means that you can connect 3.7 billion ‘things’ to the Internet. But no matter how you count, be it humans, connections, or indeed actual things, we can be sure by now that we have exceeded this number. And as the Internet keeps growing and we keep connecting more people and things, this problem only gets bigger.

The limitations of IPv4 formed the basis for developing and standardising IPv6. This work was completed in the second half of the nineties, before the dotcom boom when the Internet really took off. Using an address field of 128 bits, IPv6 expands the number of unique addresses towards 340 undecillion, which should be enough for the foreseeable future. With the protocol written and standardised, the rest should be up to the market. Or at least, that was the assumption based on the notion that, within the bottom-up model of the Internet, the market gets to pick and choose which standards to use and implement.

Knowing that there was a very real and hard limit in IPv4, we’d all assumed the market would soon recognise IPv6 as the more efficient protocol, allowing the networks and services to continue growing beyond the barriers of IPv4. As a former engineer, I know assumptions are dangerous and the case at hand appears to be a textbook example. It has been two decades since IPv6 was invented and the Internet is well and truly exceeding the number of users and devices that the IPv4 address space allows for. The consensus view at the moment is that only about one third of Internet users can use IPv6. Can use, because there are two sides to every connection, and you can only use IPv6 if both sides support it. If that is not the case, the fallback is to use IPv4.

This is where the problems start to appear, because as much as I can have a fully functional IPv6 setup, I need IPv4 as a ‘plan B’ in case the other side of my connection doesn’t. With the global and regional pools of available IPv4 addresses depleted, globally-unique IPv4 addresses have become a scarce resource. Unfortunately, this where the initial thinking got it right: a scarce and limited resource, with demand sustained or even growing, will go up in value, making it more expensive. Indeed, the value of IPv4 addresses has risen sharply over the last few years.

Faced with a dwindling supply of unassigned IPv4 addresses, people quickly figured out that there is always a certain degree of overhead in IP address allocations. Due to being binary, address blocks have a fixed length, so even if you have 129 devices on your network, the minimum size address block is 256, and the assignment process and policies also took some level of growth into account to prevent the address space from becoming too fragmented. The surplus within these assignments quickly led to the development of a secondary market in allocated but unused IPv4 addresses.

As demand grows and supplies go down, the price is going to increase. It was a bit of an outlier, but last month a small block of 256 addresses was sold at auction for just over 59 USD per address. An exceptional price maybe, but there is a very clear trend of prices going up. Although the policies at the Regional Internet Registries contain protections against speculation—once a transaction is processed, there is a “lock in” period where the same address block can’t be transferred again—there are signs that arbitration is taking place and prices are starting to converge towards a single global level.

The price of IPv4 is going up, but will it lead to large-scale adoption of IPv6? Is the market rational enough to realise that there is a more efficient means of connecting things and people to the Internet? We see lots of networks and services deploying IPv6, but it is not immediately clear that there is a massive competitive advantage for doing so. In fact, the case can still be made that there is some disadvantage to enabling IPv6, knowing that you must also maintain backward compatibility and bear the cost of maintaining connectivity to IPv4 or even expanding on your IPv4 address space. To some extent, running two protocols doubles your effort and incurs some extra costs.

If we were faced with a truly rational market, and the model I described in the first paragraph holds true, then a lack of IPv6 deployment indicates that we have not yet reached the tipping point. For the average market participant, sticking with IPv4 might still be cheaper than deploying IPv6. This also doesn’t sound right though, because running a single protocol should be cheaper and much easier to do.

The basic product ‘Internet access’ has become a commodity, and at the national level, many markets have already reached saturation point or are close. The main factor that sets competitors apart is price, and with the associated drop in profit margin, you’d expect a more cost-effective solution (IPv6) to gain traction very quickly—but it isn’t.

So, if it isn’t price, what would it take for the world to deploy IPv6 to a level where IPv4 support is no longer necessary? Because there likely will be a tipping point where a cost/benefit analysis shows that it’s more efficient to switch IPv4 off than to continue maintaining it. For such a scenario to happen, there has to be some coordination between the different actors. Enabling IPv6 is a decision you can make yourself but using it to transport data across the Internet requires the other side and any intermediaries, such as wholesale connectivity providers, to make the same decision.

This touches on what I think is one of the fundamental properties of what makes the Internet what it is: no matter how fierce the competition, you need to work together. Without a top-down structure, as we saw, for instance, in traditional telephony, coordination and cooperation between networks is what keeps it all together. The market picks its protocols and standards, but to truly benefit from the network effect where value increases with the number of participants, there needs to be some consensus on which protocols are the winning ones.

This is what sets the Internet apart from other networks and what makes the case for IPv6 a very challenging one. Because, at the technical level, there is broad consensus that IPv6 is the winner, and that consensus has been there ever since the protocol was standardised (which was itself a consensus decision).

Finding the same consensus in the boardrooms of today is a different matter. This is because while it’s easy to position IPv6 as the solution for long-term growth and a more efficient means to run the network, making the financial numbers work is much harder. There is a gain for sure, but it can take years for this to translate into profit, and there are a lot of uncertainties and externalities along the way. Especially when there is a risk-averse management or a focus on the next quarter or the end of the financial year, it can be tough to make a business case for deploying IPv6.

What is needed most for IPv6 deployment to become the de facto way to move data across our networks is vision. We need executives to share the vision that engineers had long ago, of a truly global network with room to grow. A network that not only allows you to connect every person and thing on this planet, but one that supports innovation and has the flexibility to adapt to new challenges and stand the test of time.

The IPv4 protocol has gotten us a long way, but with its limited number of addresses, it has run its course. Connecting more people and new things is getting harder, and we need IPv6 if we want to continue to expand and grow the Internet and its capabilities.

Is there another way? Perhaps there could be some intervention, for instance, by legislators forcing network and service providers to deploy a particular protocol. We certainly can’t rule this out. Many governments and even the European Union are considering their options here. For instance, the European Commission’s cybersecurity strategy mentions that it won’t exclude regulatory measures ‘to steer the market’ if it thinks insufficient progress is made.

While this can’t be ruled out, and we can discuss whether such measures would be effective, we can’t ignore that such an intervention would alter the fundamental principles of the Internet. Network operators are free to choose whatever protocols and technologies they think are best or that bring added value. This fundamental property of ‘choice’ is what got us where we are today. It is likely a big part of why the Internet has become such a success and why it has mostly overtaken all other forms of telecommunication and data networks.

Politicians talk about maintaining the Internet as a global unfragmented network that supports and lets us enjoy our freedoms, like they did in the recent G7 declaration. IPv6 provides a path to make that happen, but we all need to do our fair share. The Internet was intended to be an open, collaborative structure of networks. If we all invest just a little, for instance, by enabling IPv6, we can maintain this vision and keep the network a free, global and unfragmented space. Because in the end, the true value of the Internet cannot be expressed in monetary or economic terms alone; it is so much more than that.