Domain universe grows on new gTLDs despite .com shrinkage

The number of domain names on the internet grew by about 600,000 during the fourth quarter of 2023, despite the drag caused by shrinkage in .com and .net, according to Verisign’s latest Domain Name Industry Brief.

There were 359.8 million registered domains at the end of the year across all TLDs, a 0.2% increase over September, the latest DNIB says.

The growth was hampered by declines in Verisign’s own flagship gTLDs, which were down by 1.2 million names over Q3 and a million names year-over year. Verisign blamed softness in China for the declines during its Q4 earnings call last week.

New gTLD reg volume picked up most of the slack, growing by 1.6 million or 5.3% over Q3, and 4.4 million or 15.9% over 2022. This seems to have been largely driven by six-figure increases at a handful of low-cost gTLDs coupled with smaller increases across the board.

ccTLDs grew more modestly, up about 200,000 names or 0.2% quarter over quarter and 5.3 million names, 4%, year over year. There were 138.3 million ccTLD domains at the end of the year. Growth seems to have been tempered by six-figure declines in the likes of .uk and .ru.

.com is shrinking but Verisign raises prices again anyway

Verisign has confirmed that it plans to exercise its fourth and final .com price-increasing power under its current registry contract, even as its domains under management continues to head south.

The company confirmed last night that it will increase the annual registration and renewal wholesale fee for a .com domain from $9.59 to $10.26 on September 1 this year. It’s the last of the four times it’s allowed to raise prices by up to 7% in its current contract with ICANN, which expires in November.

The news came as Verisign reported its fourth-quarter and full-year 2023 financial results, which were as profitable as we’ve come to expect.

But in terms of domains under management, .com and .net continued to decline, which CEO Jim Bidzos told analysts was all China’s fault. Domains managed by Chinese registrars shrank by 2.2 million in Q4, leading to an overall .com/.net shrinkage of 1.2 million names.

There were nine million new .com/.net registrations in Q4, down from 9.7 million in the same quarter in 2022.

Bidzos said the decline in China was due to factors such as stricter local regulations and a weaker economy, and said he expects those challenges to continue to hit Verisign’s numbers in 2024. He did not blamed higher prices for the drop.

Indeed, the .com zone file has been shrinking by about 1,500 domains per day on average since the start of the year. Zone numbers are usually a reliable predictor of DUM trends.

Revenue from China was down about $14.4 million, CFO George Kilguss said.

Bidzos said Verisign expects its DUM to be flat this year, with a possible 1% swing either way.

For Q4, the company reported revenue up 3% year over year at $380 million, with $265 million net income, up from $179 million a year earlier.

For the whole of 2023, revenue was up 4.8% at $1.49 billion and net income was $818 million, up from $674 million in 2022.

Domain universe grows despite .com drag

The number of registered domain names in the world grew by 2.7 million in the third quarter, despite market-leading .com shrinking, according to Verisign’s latest Domain Name Industry Brief.

There were 359.3 million domains across all TLDs at the end of September, according to the DNIB. up from 356.6 million at the end of June.

Over the same period, .com shrunk by half a million names as Verisign faces challenges from exposure to erratic demand from China.

New gTLD volumes were up by 2.1 million names to end the quarter at 30.2 million. Judging by zone files, at least half of these new names seem to be cheap, low-quality regs in the likes of .top and .cfd.

Total ccTLD names were 138.1 million at the end of the quarter, up by a million. All of the top 10 ccTLDs grew or were flat, except .uk, which lost about a hundred thousand names.

Bosnian government to sue US domain firm that cut it off

One of Bosnia and Herzegovina’s two governments has said it will sue a US domain name company — probably Verisign — for turning off the domain it was using for official government business.

“The Government of the Republic of Srpska will hire legal experts to prepare a lawsuit against the company that disabled the use of the website of the Government of the Republic Srpska without prior notice,” the government said in a statement on its new web site.

It did not name the company in question, but we can narrow it down to a few.

Its old domain, vladars.net, was registered via Dotster, a reseller for Domain.com, part of Newfold Digital. The .net registry is of course Verisign. These are all American companies subject to US legal jurisdiction.

The domain still exists in Whois, but has been removed from the .net zone file and does not resolve.

The Republika Srpska, or Serb Republic, is part of Bosnia and Herzegovina that doesn’t particularly want to be a part of Bosnia and Herzegovina. As such, its new domain is in .rs, the ccTLD for neighboring Serbia, rather than Bosnia’s .ba.

The old .net domain was reportedly deleted due to US sanctions against the Republic, which were expanded October 20 to include members of President Milorad Dodik’s family and several corporate entities.

The US accuses the Dodik family of widespread “graft, bribery, and other forms of corruption” and engaging in “divisive ethno-nationalistic rhetoric” to divert attention from their activities. It additionally accuses them of violating the Dayton Peace Agreement, which ended the war in the region in the 1990s.

Nominet wins Microsoft’s dot-brand business from Verisign

Nominet has taken over back-end registry services for Microsoft’s small portfolio of dot-brand gTLDs.

The company said it’s now running .azure, .bing, .hotmail, .microsoft, .windows and .xbox TLDs, bringing the total number of gTLDs on its registry platform to 74.

Microsoft had been with Verisign to date, but Verisign told us in July that it’s getting out of the dot-brand back-end business.

Almost 100 gTLDs have left Verisign this year, the vast majority landing at Identity Digital.

Nominet also took on .sky from Verisign earlier this year.

China has .com’s growth by the balls

Verisign has downgraded its expectations for .com/.net growth for the year into potentially negative territory, citing — not for the first time — low demand from China.

The registry expects its domain name base to grow at a maximum of 0.4% or shrink as much as 0.4% by the end of the year. That compares to a prediction of between 0% and 2.25% growth at the start of the year.

“Low demand from China remains the primary source of drag on the overall domain name base growth,” CEO Jim Bidzos told analysts on Thursday. “Excluding registrars based in China, both our domain name base and new registrations are up year-over-year”.

The company’s regulatory filing for Q3 shows that China revenue was down from $26.8 million to $22 million over the year. It was the only one of the four geographic reporting segments to show a shrinkage.

Verisign ended Q3 173.9 million .com/.net domains under management, down 0.1% over the year and down half a million names in the quarter.

While DUM growth may be on the decline, price hikes compensate and keep Verisign’s dollar-growth going.

The company reported year-over-year revenue growth up 5.4% at $376 million for the quarter of 2023. Net income was $188 million, up from $169 million a year ago.

.web fight back in “court”

ICANN is heading back to the quasi-courtroom of its Independent Review Process, after .web auction runner-up Altanovo Domains filed its second IRP complaint about the controversy-ridden gTLD.

I first reported that the complaint had been filed back in July, but it was not until last Thursday that ICANN published the document, along with thousands of pages of exhibits and its own response, almost all thoroughly redacted to remove references to the one contract at the heart of the mess.

Now-independent Altanovo, which was part of Afilias before that company was acquired by Donuts, claims that ICANN broke its bylaws commitments to apply its policies equitably to everyone.

The company remains incredibly cheesed off that it lost the 2016 auction for .web, which saw a company called Nu Dot Co pay ICANN $135 million for the domain, at a time when it was secretly backed by Verisign.

Altanovo claims that NDC broke the terms of ICANN’s Applicant Guidebook and the rules of the auction by declining to disclose the existence of the Domain Acquisition Agreement it had signed with Verisign.

That deal saw Verisign bankroll and dictate the terms of NDC’s handling of the auction; in exchange, NDC would transfer .web to Verisign shortly after signing its ICANN registry agreement.

Altanovo has already won one IRP about this. The panel in the first case ruled in May 2021 that ICANN broke its bylaws because its board did not make a decision on whether NDC’s behavior was kosher.

As a result of that ruling, the board spent over a year mulling and eventually decided this April that, no, NDC didn’t break the rules. It’s that decision that Altanovo is challenging now. The complaint says:

NDC had no independent business plan for .WEB that it intended to implement. Its sole purpose in applying for .WEB was to obtain it for the oldest of the incumbent players, not to market .WEB itself in any way or to compete in the market… No one in the Internet Community, including the other .WEB Contention Set members, had any clue that, as of August 2015, they were competing with Verisign and not NDC.

ICANN’s response to the complaint states that its board was exercising its “business judgement”, which must be deferred to, and that Altanovo’s claims about bylaws breaches merely amount to differences of interpretation.

Speaking to analysts on Verisign’s third-quarter earnings call last week, company CEO Jim Bidzos quoted from the conclusion of ICANN’s IRP response and added: “Altanovo’s IRP request should be denied. We agree with ICANN.”

“We continue to believe that this IRP filed by Altanovo and its backers has been filed for the purpose of delay,” he said.

Altanovo reckons that Verisign and ICANN have been colluding on their legal responses to the .web and that certainly seems likely in terms of the redactions ICANN has made to the complaint and response published last week.

All quotations of the Verisign-NDC DAA are redacted in the Altanovo complaint are redacted as “third party confidential”, presumably at Verisign’s request; in the ICANN response the single DAA quote remains unredacted.

Palage’s epic rant as he asks ICANN to cancel Verisign’s .net contract

ICANN is devolving into a trade association hiding under a thinning veneer of multistakeholderism and the domain industry is becoming a cartel.

Those are two of the conclusions reached by consultant Michael Palage, who’s been involved with ICANN since pretty much the start, in an epic Request for Reconsideration in which he asks the Org to unsign Verisign’s recently renewed .net registry contract.

ICANN’s equally intriguing response — denying, of course, Palage’s request — also raises worrying questions about how much power ICANN’s lawyers have over its board of directors.

The RfR paints a picture of a relationship where Verisign receives special privileges — such as exemptions from certain fees and obligations — in exchange for paying higher fees — contributing $55 million of ICANN’s budget — some of which is accounted for quite opaquely.

Palage claims the domain industry of being “on the precipice of becoming a cartel” due to recent consolidation, and says that is being enabled by ICANN’s failure to conduct an economic study of the market.

Verisign’s .net and .com contracts are the only registry agreements that do not oblige the registry to participate in economic studies, Palage says, reducing ICANN’s ability, per its bylaws, “to promote and sustain a competitive environment in the DNS market.”

Palage writes:

The failure of ICANN to have the contractual authority to undertake a full economic study to ensure a “competitive environment in the DNS market” undermines one of its core values. This failure is resulting in a growing consolidation within the industry which is on the precipice of becoming a cartel. ne needs to look no further than four US-based companies, Verisign, PIR, GoDaddy, and Identity Digital which currently control almost the entirety of the gTLD registry market based on domain names under management. This unchecked consolidation within the industry directly and materially impacts the ability of individual consultants to make a livelihood unless working for one of the dominant market players.

While Palage says he and other registrants are being harmed by increasing .net prices, and that an economic study would help lower them, he also asks ICANN to get Verisign to migrate to the Base Registry Agreement, which would enable Verisign to raise prices at will, without the current 10%-a-year cap.

He’s also concerned that ICANN’s volunteer community is shrinking as the domain industry becomes an increasingly dominant percentage of public meeting attendance.

Figures published by ICANN show that, at the last count, 39% of attendees were from the domain industry. ICANN stopped breaking down attendee allegiance in 2020 during the pandemic and did not resume publication of this data afterwards.

“ICANN has started down the slippery slope of becoming a trade association,” Palage writes.

While his RfR was going through the process of being considered by ICANN and its Board Accountability Mechanisms Committee, Palage separately wrote to ICANN general counsel John Jeffrey to express concerns that ICANN policy-making might be risking falling foul of antitrust law.

It seems a recent meeting of the working group discussing updates to ICANN’s Transfers Policy debated whether to cap the amount registries are allowed to charge registrars for bulk transfers. Dollar amounts were discussed.

Palage suggested ICANN might want to develop a formal antitrust policy statement that could be referred to whenever ICANN policy-makers meet, in much the same way as its Expected Standards of Behavior are deployed.

If the RfR as published by ICANN lacks some coherence, it may be because ICANN’s lawyers have redacted huge chunks of text as “privileged and confidential”. That’s something that hardly ever happens in RfRs.

It seems Palage knows some things about the .net contract and Verisign’s relationship with ICANN from his term on the ICANN board, which ran from April 2003 to April 2006, a time when Verisign and ICANN were basically at war.

Because the information Palage is privy to is still considered privileged by ICANN, it was redacted not only from the published version of the RfR but also it seems from the version supplied to the BAMC for consideration.

ICANN cited this part of its bylaws to justify the redactions:

The Board Accountability Mechanisms Committee shall act on a Reconsideration Request on the basis of the public written record, including information submitted by the Requestor, by the ICANN Staff, and by any third party.

Reading between the lines, it seems most of the redactions likely refer to the Verisign v ICANN lawsuit of 2004-2005.

Fellow greybeards will recall that Verisign sued ICANN for blocking its Site Finder service, which put a wildcard in the .com zone and essentially parked and monetized all unregistered domains while destabilizing software that relied on NXDOMAIN replies.

The October 2005 settlement (pdf) forced Verisign to acknowledge ICANN as king of the internet. In exchange, it got to keep .com forever. The deal gave Verisign financial security and ICANN legitimacy and was probably the most important of ICANN’s foundational documents before the IANA transition.

So what did the board of 2005 know that’s apparently too sensitive for the board of 2023? Dunno. I asked Palage if he’d be willing to share and he politely declined.

In any event, his RfR (pdf), which among other things asked for ICANN to reopen .net contract negotiations, was dismissed summarily (pdf) by BAMC last week on the grounds that he had not sufficiently shown how he was injured by ICANN’s actions.

Verisign: 1.7 million domain industry growth in Q2

The DNS grew by 1.7 million domains in the second quarter, according to Verisign’s latest Domain Name Industry Brief.

The quarter ended with 356.6 million domains across “all” TLDs, the company said. That’s up 1.7 million on the quarter and 4.3 million on the year.

I put “all” in quotes because it turns out Verisign hasn’t been including over a dozen TLDs in its calculations in previous reports.

Inexplicably, it hasn’t been counting 10 pre-2012 gTLDs — .aero, .asia, .cat, .coop, .gov, .museum, .pro, .tel, .travel and .xxx — for which zone files have been readily available for years. It’s also added six small ccTLDs to its calculations.

The upshot of this is that while a comparison with the Q1 DNIB would suggest growth of 2.6 million domains, it’s not, it’s just 1.7 million.

The report shows that both .com and .net shrunk in the quarter — 161.3 million versus 161.6 million and 13.1 million versus 13.2 million.

New gTLDs and ccTLDs were left to pick up the slack. Total ccTLD names was up 1.1 million to 137 million and total new gTLD domains was up 0.8 million to 28.1 million.

.web hit by second ICANN complaint

Altanovo Domains, the Afilias spin-off that is fighting Verisign for control of the .web gTLD, has filed a second Independent Review Process complaint with ICANN.

The filing could add years to Verisign’s launch runway for .web, which it won via secret proxy Nu Dot Co at auction in 2016.

ICANN has not yet published the IRP complaint — presumably it’s being redacted to remove commercially confidential information — but documentation shows Altanovo has “filed” an IRP.

Altanovo and ICANN has been in a Cooperative Engagement Process — a form of negotiation designed to avoid an IRP — since May 3, but a document published July 19 shows that the CEP is now over.

It was quite a brisk process. Other CEPs have been known to last many months.

When the CEP first emerged in May, Verisign was pretty brutal in its reaction, accusing Altanovo of “delay for delay’s sake”.

As the second-place bidder, Altanovo could stand to take control of .web if Verisign’s bid was found to be outside the rules. That was the focus of the first IRP case, which lasted almost four years.

The first IRP panel ruled that ICANN broke its bylaws by failing to consider whether Verisign secretly bidding via NDC broke the new gTLD program rules. But ICANN a couple months ago finally bit the bullet and ruled that Verisign did no wrong.

ICANN decided not to rule on whether Altanovo, then Afilias, broke the auction rules by communicating with NDC during a comms blackout period.

The specific allegations in the new IRP are not yet known. The IRP is only for complaints about ICANN’s actions or inaction breaking its own bylaws and other foundational documents.