Milwaukee Will Net $300,000 By Selling ‘Virtual Asset’

CC0 Public Domain.

The proliferation of cell phones, wifi-enabled ovens and other internet-connected devices will create a one-time windfall for the City of Milwaukee. The city will net $307,000 after selling 8,192 unused Internet Protocol (IP) addresses to WiredISP, an internet service provider.

The short way to understand the news is to imagine what the city is selling to be similar to telephone numbers. Milwaukee, by chance, has more than twice as many allocated as it needs, and there is a global shortage. There will eventually be more numbers, like how new area codes are added, but it’s a seller’s market for the foreseeable future.

City Chief Information Officer David Henke told the Finance & Personnel Committee Wednesday morning that the situation presented the city with a “unique opportunity” to sell. His office made a conservative estimate in 2022 that it could make $50,000 after paying a broker. “We saw an opportunity to receive revenue from an unused virtual asset.” It’s now getting far more.

The city will receive $39 per address before broker Kalorama Group takes an approximately $12,000 fee. “I am confident we are getting the best price available today,” said Henke. Internationally, the per-address fee has climbed from approximately $5 in 2015 to more than $30 in 2022 according to IPv4 Market Group.

The long way to understand what the city is actually selling, and how, requires understanding how devices talk to each other across the internet.

Every device connected to the internet gets an IP address and addresses have long been formatted as four sets of three-digit numbers, such as 127.0.0.1 or 50.116.60.60, yielding 4.3 billion combinations through what is known as IPv4.

Through the proliferation of internet-enabled devices and imprecise allocations, such as the responsible agency freely allocating the City of Milwaukee a pool of 16,384 addresses in 1994, there is now a shortage of available IP addresses.

A new framework, IPv6, was launched as a replacement. The actual address length was quadrupled to 128 bits, which results in 340 trillion possible addresses. Problem solved, but only years in the future when all of the implementation issues have been addressed.

In the meantime, a handful of institutions that own banks of thousands, if not millions, of unused addresses are able to cash in. A California-based amateur radio foundation sold four million addresses to Amazon in 2019 for $108 million, $27 each.

“Congratulations to you for being extremely innovative,” said committee chair Alderwoman Marina Dimitrijevic. “It’s assumed by the nature of your position, but we do thank you.”

The committee unanimously endorsed the sale agreement. The proceeds will be transferred to the city’s general fund upon closing. The city will retain the other 8,192 addresses it was allocated, though Henke said it is not using all of them.

Related Legislation: File 230610