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ICANN grants Verisign its price increases, of course

Kevin Murphy, March 30, 2020, 13:53:36 (UTC), Domain Registries

ICANN has given Verisign its ability to increase .com prices by up to 7% a year, despite thousands of complaints from domain owners.

The amendments give Verisign the right to raise prices in each of the last four years of its six-year duration. The current price is $7.85 a year.

Because the contract came into effect in late 2018, the first of those four years begins October 26 this year, but Verisign last week said that it has frozen the prices of all of its TLDs until 2021, due to coronavirus.

Not accounting for discounts, .com is already already worth $1.14 billion in revenue to Verisign every year, based on its end-of-2019 domains under management.

In 2019, Verisign had revenue of $1.23 billion, of which about half was pure, bottom-line, net-income profit.

In defending this shameless money-grab, ICANN played up the purported security benefits of the deal, while offering a critique of the domainers and registrars that had lobbied against it.

Göran Marby, ICANN’s CEO, said in a blog post.

I believe this decision is in the best interest of the continued security, stability, and resiliency of the Internet.

Overall, the decision to execute the .COM Registry Agreement amendment and the proposed binding Letter of Intent is of benefit to the Internet community.

The decision was explained in more detail in a eight-page analysis document (pdf) published late last week.

I’ll summarize this paper in three bullet points (my words, not ICANN’s):

  • Domainers are hypocrites.
  • The deal is good for DNS security.
  • Our hands were tied anyway.

First, while ICANN received over 9,000 comments about the proposed amendment, almost all negative, it said that publicity campaigns from domainer group the Internet Commerce Association and domainer registrar Namecheap were behind many of them.

the Internet Commerce Association (ICA) and Namecheap, are active players in the so called “aftermarket” for domain names, where domain name speculators attempt to profit by “buying low and selling high” on domain names, forcing end users to pay higher than retail prices for desirable domain names

It goes on to cite data from NameBio, which compiles lists of secondary market domain sales, to show that the average price of a resold domain is somewhere like $1,600 (median) to $2,400 (mean).

Both Namecheap and ICA supporter GoDaddy, which sells more .coms than any other registrar, have announced steep increases in their .com retail renewal fees in recent years — 20% in the case of GoDaddy — the ICANN document notes.

This apparent hypocrisy appears to be reason ICANN felt quite comfortable in disregarding many of the negative public comments it received.

Second, ICANN reckons other changes to the .com contract will benefit internet security.

Under a side deal (pdf) Verisign’s going to start giving ICANN $4 million a year, starting next January and running for five years, for what Marby calls “ICANN’s initiatives to preserve and enhance the security, stability, and resiliency of the DNS.” These include:

activities related to root server system governance, mitigation of DNS security threats, promotion and/or facilitation of Domain Name System Security Extensions (DNSSEC) deployment, the mitigation of name collisions, and research into the operation of the DNS.

Note that these are without exception all areas in which ICANN already performs functions, usually paid for out of its regular operating budget.

Because it looks like to all intents and purposes like a quid pro quo, to grease the wheels of getting the contract amendments approved, Marby promised that ICANN will commit to “full transparency” as to how its new windfall will be used.

The new contract also has various new provisions that standardize technical standardization and reporting in various ways, that arguably could provide some minor streamlining benefits to internet security and stability.

But ICANN is playing up new language that requires Verisign to require its registrars to forbid their .com registrants from doing stuff like distributing malware and operating botnets. Verisign’s registrar partners will now have to include in their customer agreements:

a provision prohibiting the Registered Name Holder from distributing malware, abusively operating botnets, phishing, pharming, piracy, trademark or copyright infringement, fraudulent or deceptive practices, counterfeiting or otherwise engaging in activity contrary to applicable law and providing (consistent with applicable law and any related procedures) consequences for such activities, including suspension of the registration of the Registered Name;

Don’t expect this to do much to fight abuse.

It’s already a provision that applies to hundreds of other TLDs, including almost all gTLDs, and registrars typically incorporate it into their registration agreements by way of a link to the anti-abuse policy on the relevant registry’s web site.

Neither Verisign nor its registrars have any obligation to actually do anything about abusive domains under the amendments. As long as Verisign does a scan once a month and keeps a record of the total amount of abuse in .com — and this is data ICANN already has — it’s perfectly within the terms of its new contract.

Third and finally, ICANN reckons its hands were pretty much tied when it comes to the price increases. ICANN wrote:

ICANN org is not a competition authority or price regulator and ICANN has neither the remit nor expertise to serve as one. Rather, as enshrined in ICANN’s Bylaws, which were
developed through a bottom up, multistakeholder process, ICANN’s mission is to ensure the security and stability of the Internet’s unique identifier systems. Accordingly, ICANN must defer to relevant competition authorities and/or regulators, and let them determine if any conduct or behavior raises anticompetition concerns and, if so, to address such concerns, whether it be through price regulation or otherwise. As such, ICANN org has long-deferred to the DOC and the United States Department of Justice (DOJ) for the regulation of wholesale pricing for .COM registry services.

It was of course the DoC, under the Obama administration, that froze Verisign’s ability to raise prices and, under the Trump administration, thawed that ability in November 2018.

If you’re pissed off that the carrying cost of your portfolio is about to go up, you can blame Trump, in other words.

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Comments (7)

  1. Rubens Kuhl says:

    An election is coming this year to who is new POTUS, so every registered US voter can factor this price increase in his or her decision.

  2. Ian Ingram says:

    Verisign has been on easy street for far too long. They have no competition. Their operating costs have been going down every year for at least the last 10 years. Their total number of employees has been dropping every year for at least the last 8 years. Their net income has increased every year for at least the last 10 years while the active zone for .com and .net has increased from 96.7 million to 158.8 million. Verisign’s net income per employee was over $700,000 in 2019. This is more than Apple, Microsoft, Google & Facebook.

    Not only is Verisign ridiculously profitable with the unending gravy train that is the .com monopoly, they also appear to have ICANN firmly in their pocket. It seems Verisign can get ICANN to essentially do whatever they please. Here’s an extra $20 million, dance for me ICANN, dance!

    So ICANN is choosing to take $4 million more per year for five years and Verisign gets an additional ~$1 Billion in pure profit over that span with these price increases. This doesn’t take into account additional increases in the .com base or further price increases later on. Domain registrants will be forced to pay those prices as migrating to another gTLD just isn’t a serious option. It’s a shame that what appears to be weak minded and greedy individuals are in charge of keeping the public’s best interest in mind. It is surprising that those on the board of ICANN don’t realize that by continuing to be beholden to Verisign they are asking for more scrutiny to their systems, processes and salaries of their “not-for-profit public-benefit corporation”…

    With a few keystrokes ICANN could save millions of registrants from continued & unjustified price increases and further, they could even help to lower those set costs by allowing a competitive bid for the .com contract. They could do this with impunity as it is not only part of their intended purpose, it is the right thing to do. Yet ICANN is choosing to increase the profits of one corporation who is already wildly profitable.

    The new gTLD experiment has proven that .com reigns supreme. No other gTLD is even close. It has also proven that someone else could take over the .com contract and run it while remaining profitable for an amount that is ridiculously less than Verisign. If Verisign were told they had to decrease prices 30% or the .com contract would be put out for competitive bid, they would take the decrease and consider themselves lucky that they still had the contract.

    One thing is for sure, at some point everyone has to face the decisions they have made in life. When they close their eyes will their decisions help them rest easily, or will they go through life looking over their shoulder always wondering when karma will catch up. Verisign’s coffers are stuffed already and giving them more isn’t going to make the internet a more secure and stable environment no matter how they sell it. It’s very clear that giving Verisign more does not benefit the public’s best interest, it in fact does the opposite. There is a saying that when it is a choice between morality and profit, profit seldom loses. ICANN may line their and Verisign’s pockets temporarily as a result, but what will these decisions ultimately cost them and how long can they continue before it comes crumbling down?

  3. Rob Golding says:

    The only part that was ever in doubt, was whether the 20m$ bung was enough !

  4. Chris says:

    The department of commerce isn’t actually raising the prices, but they intend to increase the pricing flexibility for Verisign. And, as you can expect from a monopoly, Verisign uses that freedom to increase their price by that amount. It’s not a good idea to intentionally let a for profit businesses run a monopoly, but apparently the American government doesn’t always agree with me on that one.

    If a market has monopolistic tendencies it’s very hard to determine a fair price. I mean, should the domains be offered at cost price? Should Verisign aim for 10% profit, which is common with many businesses? Should Verisign be allowed to ask what .com domains are actually worth to people, which might mean a drastic price increase? Or should we give Verisign a flat fee of a billion dollars a year out of gratitude or to strengthen their buffers? Or should the tld go to the highest bidder every couple years? Or should the tld go to the party that claims to offer the cheapest service (and hope we aren’t going to regret going for the cheapest option)?

    There is no clear answer to that. So I think that if you want to keep the current system, then it would be a good idea to formulate what the price should actually relate to. Because I get the impression the regulators are now just pulling price rates out of their behinds.

    I don’t think that anyone in the history of business ever aimed for “a 7% price increase per year in the last 4 years out of the upcoming 6 year period”. Is anyone convinced that these numbers are actually based on anything? Perhaps the domain market is becoming 7% more ‘flexible’ every year?

    I think a 10 dollar .com domain is still very affordable, but I do believe the price should actually be based on something.

  5. June 4, 2019
    Why Verisign ‘NASDAQ:VRSN’ Will Inevitably Get Its .COM Domain Price Increase Sought
    https://www.strategicrevenue.com/verisign-nasdaqvrsn-will-inevitably-get-its-com-domain-price-increase-sought/

  6. Steve GOBIN says:

    I’m not in favour of this decision nor do I approve the untold arrangements between ICANN and Verisign. However, ICANN’s arguments about some registrars that stood against the price increase while they have been increasing their retail prices in a much larger extend or about some or about similar registrar that have made very high profits on the 2nd hand market is relevant.

    • John says:

      Why does pricing at the retail level or in the aftermarket have any consideration with pricing / rates a monopolist is able to charge?

      There is vast competition at the retail level – but zero competition at the wholesale level.

      Domain names are portable at the retail level. Registrants can transfer their domain to hundreds of other ICANN accredited registrars.

      Domain names are NOT portable at the registry level. Verisign is the only provider of Com registry services and they have a monopoly – and pricing power over 144 million existing registrants.

      If any customer unhappy with pricing at the retail level, they can simply transfer their domain to any other ICANN accredited registrar. ICANN made this very point in the same decision paper saying “Although registrars are not obligated to offer 10-year registrations, registrants have the ability to transfer their domain names to any accredited registrar that does.”

      Does it matter if GoDaddy raised prices in the past? No – because registrants can switch to hundreds of other ICANN registrars if they don’t like prices. Registrants have choices and options. Network Solutions also has higher prices. Just because GoDaddy has raised its prices in the past – does not mean a monopolist should be able to raise prices unfettered on its captive base of 144 million registrants.

      Many ICANN Accredited registrars offer very low prices. And some offer below cost pricing. Because of vast competition at the retail / registrar level, many registrars are forced to lower their prices to compete to get the business. Competition is healthy at the retail / registrar level and margins are very low.

      DynaDot charges $7.99 (at a loss)
      CloudFlare charges $8.03 (at cost)
      Moniker charges $8.39
      Epik charges $8.49
      Fabulous charges $8.49
      NameBright charges $8.53
      PorkBun charges $8.56
      NameCheap charges $8.88
      NameSilo charges $8.99
      Name charges $8.99
      Domain charges $9.99
      BigRock charges $9.99

      Why did ICANN fail to ignore pricing in the entire DNS in its “analysis” – and just cited one example of GoDaddy?

      Also, I strongly believe ICANN’s conclusion that “retail prices…..have continued to rise” is wrong. How exactly did ICANN perform this analysis and come to this conclusion?

Leave a Reply to Rob Golding