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Verisign pays ICANN $20 million and gets to raise .com prices again

Kevin Murphy, January 3, 2020, 14:46:19 (UTC), Domain Registries

Verisign is to get the right to raise the price of .com domains by 7% per year, under a new contract with ICANN.
The deal, announced this hour, will also see Verisign pay ICANN $20 million over five years, starting in 2021, “to support ICANN’s initiatives to preserve and enhance the security, stability and resiliency of the DNS”.
According to ICANN, the pricing changes mean that the maximum price of a .com domain could go as high as $10.26 by October 2026.
Verisign getting the right to once more increase its fees — which is likely to be worth close to a billion dollars to the company’s top line over the life of the contract — was not unexpected.
Pricing has been stuck at $7.85 for years, due to a price freeze imposed by the Obama-era US National Telecommunications and Information Administration, but this policy was reversed by the Trump administration in late 2018.
The amendment to the .com registry agreement announced today essentially takes on the terms of the Trump appeasement, so Verisign gets to up .com prices by 7% in the last four years of the six-year duration of the contract.
ICANN said:

ICANN org is not a price regulator and will defer to the expertise of relevant competition authorities. As such, ICANN has long-deferred to the [US Department of Commerce] and the United States Department of Justice (DOJ) for the regulation of pricing for .COM registry services.

But ICANN will also financially benefit from the deal over and above what it receives from Verisign under the current .com contract.
First, the two parties have said they will sign a binding letter of intent (pdf) committing Verisign to give ICANN $4 million a year, starting one year from now, to help fund ICANN’s activities:

conducting, facilitating or supporting activities that preserve and enhance the security, stability and resiliency of the DNS, which may include, without limitation, active measures to promote and/or facilitate DNSSEC deployment, Security Threat mitigation, name collision mitigation, root server system governance and research into the operation of the DNS

That’s basically describing one of ICANN’s core missions, which is already funded to a great extent by .com fees, so quite why it’s being spun out into a separate agreement is a little bit of a mystery to me at this early stage.
Don’t be surprised if you hear the words “bung” or “quid pro quo” being slung around in the coming hours and days by ICANN critics.
The second financial benefit to ICANN comes from additional payments Verisign will have to make when it sells its ConsoliDate service.
This is the service that allows .com registrants, via their registrars, to synchronize the renewal dates of all of the domains in their portfolio, so they only have to worry about renewals on a single day of the year. It’s basically a partial-year renewal.
Under the amended .com contract, ICANN will get a piece of that action too. Verisign has agreed to pay ICANN a pro-rated fee, based on the $0.25 per-domain annual renewal fee, for the number of days any given registration is extended using ConsoliDate.
I’m afraid to say I don’t know how much money this could add to ICANN’s coffers, but another amendment to the contract means that Verisign will start to report ConsoliDate usage in its published monthly transaction reports, so we should get a pretty good idea of the $$$$ value in the second half of the year.
The amended contract — still in draft form (pdf) and open for public comment — also brings on a slew of new obligations for Verisign that bring .com more into line with other gTLDs.
There’s no Uniform Rapid Suspension policy, so domain investors and cybersquatters can breath a sigh of relief there.
But Verisign has also agreed to a new Registry-Registrar Agreement that contains substantial new provisions aimed at combating abuse, fraud and intellectual property infringement — including trademark infringement.
It has also agreed to a series of Public Interest Commitments, along the same lines as all the 2012-round new gTLDs, covering the same kinds of dodgy activities. The texts of the RRA addition and PICs are virtually identical, requiring:

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;

There are also many changes related to how Verisign handles data escrow, Whois/RDAP and zone file access. It looks rather like users of ICANN’s Centralized Zone Data Service, including yours truly, will soon have access to the humongous .com zone file on a daily basis. Yum.
The proposed amendments to the .com contract are now open for public comment here. You have until February 14. Off you go.

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Comments (12)

  1. Rubens Kuhl says:
    January 3, 2020 at 2:50 pm

    So, Verisign will fund ICANN’s programs with flawed methodology like DAAR, so they can generate more flawed results faster. Geez.

    Reply
  2. John says:
    January 3, 2020 at 3:05 pm

    What a sham.
    The existing .com registry agreement has .com domains prices fixed at $7.85 through 2024 for consumer protection. ICANN agreed to this back in 2016.
    ICANN determined Verisign was already generating an enormous amount of money and that consumers should be protected by capping the wholesale prices at $7.85. They did this back in 2016.
    But now, ICANN is amending its contract more than 4 years EARLY to allow Verisign to charge supracompeitive prices on its captive base of existing registrants.
    ICANN is making its decisions that benefit one for-profit company at the detriment of 143,000,000 registrants.
    Higher prices which are 100% unwarranted. There is no justification for higher prices.
    The only justification is to pump billions and billions more of profits into Verisign’s pockets.
    .com is a monopoly with enormous market power. Verisign is already one of the most profitable companies in the world – and it generates an insane amount of free cash flow and operating margins. Verisign’s operating margins are approaching 70%. It will do more than $800 million in free cash flows on $1.2 billion in revenues! This is all without any pricing caps…….
    But now – Verisign can increase its prices by 31% over the next 4 years??????

    Reply
    • Rubens Kuhl says:
      January 3, 2020 at 3:08 pm

      Actually, in the past ICANN allowed .com price increases, but DoC blocked them. It was the change in US administration that now allowed .com prices to increase.

      Reply
  3. John says:
    January 3, 2020 at 3:15 pm

    Is anybody paying any attention to Verisign’s financials?
    The base of .com domains has climbed from 84 million in 2009 to 141 million at the end of 2018. Because of economies of scale, the marginal cost of each registration is near zero.
    The base of domain names continues to climb.
    Ironically, the total cost of operating the registry have decreased ($456 million in 2009 and $447 million in 2018.)
    Meanwhile, Verisign’s revenues have doubled, from $615 million in 2009 to $1.215 billion in 2018. In other words, every new registration and renewal translates to pure profit for Verisign because its functions are entirely automated and it need not do any additional work or provide any expanded services to register or renew .com domain names.

    Reply
    • moo says:
      January 3, 2020 at 3:23 pm

      Everyone here is paying attention, John. What can we possibly do about that?

      Reply
      • Rubens Kuhl says:
        January 3, 2020 at 5:23 pm

        This change happened due to a change in US administration. So, if you are eligible to vote in the US 2020 presidential election, there is something you can do about that.

        Reply
  4. John says:
    January 3, 2020 at 3:32 pm

    If Verisign’s actual costs have declined and continue to decline, while the base of domains continues to increase, what is the justification for any price increase?
    Why should a company that operates a no-bid, monopoly contact be allowed to increase prices while it costs continue to go down?
    Worldwide .com registrants (143,000,000 of them) will be forced to pay more money for each domain renewal – and the excess (or supracompetitive profits) will be funneled into one for-profit company.
    Now registrants will be forced to pay 31% more for their domain names by 2024 – despite the fact that the actual cost to operate the .com registry are going down!
    Sure, all is well in the DNS industry.

    Reply
  5. Mark Thorpe says:
    January 3, 2020 at 3:57 pm

    What is the purpose of having a contract ICANN, if it can be amended at any time?! You might as well say your contracts are open-ended and that they can be changed for your benefit at any moment.

    Reply
  6. John says:
    January 3, 2020 at 4:30 pm

    Considering the base of .com domains is 143,000,000 today and with a projected 3.0% increase per year on the base of domain names, this price hike will generate the following additional profits for Verisign each year:
    2021 – $80,935,855
    2022 – $172,563,336
    2023 – $267,046,902
    2024 – $392,672,084
    The cumulative impact of 7% raise is a 31% rate hike through 2024. Thus, Verisign will generate an additional $922,218,177 in excess profits.
    Despite the fact that Verisign’s costs are going down.
    Pretty swell to operate a no-bid monopoly contract, which will never be subject to competitive bidding, and having the ability to increase prices without any justification.

    Reply
  7. John says:
    January 3, 2020 at 5:13 pm

    “And I saw the dead, the great and the small, standing before the throne, and books were opened; and another book was opened, which is of life; and the dead were judged from the things which were written in the books, according to their deeds.” (Revelation 20:12)

    Reply

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