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If your computer obtains an address in the 169.254.x.x range, it means your computer cannot communicate with a Dynamic Host Configuration Protocol (DHCP) server. This occurs for most home Internet users because of one of three problems:
The 169.254.0.0 – 169.254.255.255 address range is for the dynamic self-assignment of “link local” addresses. If your computer has not been manually configured with an IP address, it sends out a DHCP request for an IP address. When the computer fails to hear from a local DHCP server, it selects one of the IP addresses in this range at random and broadcasts an Address Resolution Protocol (ARP) request to see if any other computer has the selected IP address. If no other system responds to the “Who has this IP address” ARP request, your computer uses the randomly selected IP address for communication with the local network.
This process allows computers which have no DHCP server to assign themselves IP addresses to enable them to communicate with each other. However, while this might let several computers automatically set up a network between themselves, it won’t let them talk to the Internet because this dynamic IP address assignment process cannot discover or create a gateway to the Internet, so you have no Internet connectivity.