The other IP address transfer market: mergers

The recent Nortel bankruptcy proceeding provided some clarity concerning the legacy space holders property rights in IP addresses. Another transfer likely involving legacy space is in the works.  CenturyLink, which became the third-largest telecommunications company in the United States after acquiring regional bell company Qwest in April 2011 for $12.2 billion in stock, has agreed to acquire Savvis, Inc. for $2.5 billion in stock and cash.  Savvis has substantial v4 address space and data center assets, much of which it got in a 2004 acquisition of Cable & Wireless.  According to ARIN’s Whois, about 60 of Savvis’s 130 address blocks indicate registration dates prior to ARIN’s formation.

Looking at the Quavvis [Qwest + Savvis] deal and the recent acquisition of Global Crossing by Level 3, Renesys blog suggests that companies are waking up to the scarcity of IPv4 addresses and demand for those resources could be a reason behind acquisitions:

Another way to consider such mergers is by the potential for future sales. While divining the future is never easy, there is one certainty in this market: the raw material of the current Internet is extremely limited and becoming more so all the time. I’m talking about IPv4 addresses. Before much longer, there will be only one place to get them, namely, existing service providers. The lack of this raw material will undoubtedly curtail the growth of some providers and limit new entrants into the market.

Taking into account the various Level3 and Global Crossing acquisitions over the years, the newly formed Level Crossing [Level 3 + Global Crossing] will control nearly 50 million IPv4 addresses or over 1% of all available address space.  In contrast, Qwavvis will control about half as much space. For both companies, much of this space is currently unused. As consolidation in the industry continues, not only will customers have fewer choices, they might also need to consider if their potential vendors will have the IP resources available to accommodate their future growth.

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