Worried about governments seizing .com domains? Too late

Language proposed for Verisign’s .net registry contract that some say would give governments the ability to arbitrarily seize domains is already present in the company’s .com contract.

As I reported earlier this month, the .net Registry Agreement is up for renewal and ICANN has opened up some largely uncontroversial proposed changes for public comment.

ICANN has received two comments so far, both of which refer to what one commenter called the “outrageous and dangerous” proposed changes to Verisign’s .net Registry-Registrar Agreement.

The RRA is the contract all accredited registrars must agree to when they sign up to sell domains in a given TLD. For ICANN, it’s a way to vicariously enforce policy on registrants via registrars via registries.

Unsimply put, the RA instructs Verisign to have an RRA with its registrars that tells them what rules their registrants have to agree to when they buy a domain name.

The new language causing the consternation is:

Verisign reserves the right to deny, cancel, redirect or transfer any registration or transaction, or place any domain name(s) on registry lock, hold or similar status, as it deems necessary, in its unlimited and sole discretion:

…

to ensure compliance with applicable law, government rules or regulations, or pursuant to any legal order or subpoena of any government, administrative or governmental authority, or court of competent jurisdiction

One commenter states “this proposed agreement would allow any government in the world to cancel, redirect or transfer to their control applicable domain names”, adding “presumably ICANN staff and Verisign would want to also apply it to other extensions like .COM as those contracts come up for renewal”.

In fact, it’s the other way around. The exact same language has been present in Verisign’s .com contract for over three years, a change to Appendix 8a (pdf) that went largely unnoticed when thousands of commenters were instead complaining about the removal of price caps and fretting about the rise of Covid-19 around the world.

For those worried about the new .net language making it into the .com contract one day — worry not! It’s already there.

.com was a drag on the industry in Q4

The .com gTLD was a growth drag on domain name registrations in the fourth quarter, if the latest figures in Verisign’s Domain Name Industry Brief are to be believed.

The industry closed out 2022 with 350.4 million domains all TLDs that the DNIB tracks (which excludes Freenom’s free ccTLDs), up half a million in the quarter and 8.7 million over the year.

But that was despite Verisign’s own .com, rather than due to it. The DNIB has .com down from 160.9 million to 160.5 million. Sister TLD .net was flat at 13.2 million.

It was left to new gTLDs and ccTLDs to pick up the slack.

ccTLDs accounted for 133.1 million names, up 700,000 sequentially and 5.7 million over the year. New gTLD registrations were up 100,000 sequentially and 2.7 million over the year.

A big driver in ccTLDs was Australia’s .au, where the launch of direct second-level registrations added hundreds of thousands of domains and let the ccTLD kick .xyz out of the top 10 TLDs by volume.

But the report has a pretty big discrepancy that could throw out the ccTLDs number, I believe. For some reason the DNIB has .eu increasing by 300,000 names to 4 million in Q4, which flies in the face of the registry’s own numbers, which have it basically flat at 3.7 million.

.com shrinks again, but prices to go up again

Verisign plans to increase .com prices again this year, as its latest quarterly results show its top line and margins swelling despite renewals and overall domains under management shrinking.

The company ended 2022 with 173.8 million .com and .net regs in the domain name base, only up 0.2% from the start of the year. Only a quarter ago, it had predicted growth of between 0.25% and 1%.

A year ago, it had predicted that metric to grow between 2.5% and 4.5%, but it reduced its outlook every quarter and eventually missed even its barrel-bottom estimate. The two TLDs shrank by about 400,000 names in Q4.

For 2023, the company expects domain growth of between no growth at all and 2.5%.

The poor performance in volume terms came about as result of post-pandemic effects and China volatility, CEO Jim Bidzos told analysts. He did not blame the last few years of price increases for the dip.

The preliminary renewal rate for Q4 was 73.2% compared to 74.8% in the same quarter of 2021, but new regs were down across the two TLDs also — 9.7 million compared to 10.6 million over the same periods.

But of course domains under management alone is a poor way to measure Verisign’s cash-printing machine.

The company reported 2022 net income of $674 million which was down from $785 million a year earlier when it had benefited from a one off tax-related boost of $165.5 million.

Annual revenue was up 7.3% at $1.42 billion, a touch ahead of the 7% .com price increase it imposed during the year. Operating margin for 2022 was 66.2%, up from 65.3%.

For the quarter, net income was $179 million compared to $330 million (with the aforementioned tax benefit) on revenue that was up 8.5% at $369 million. Margin was 66.5% compared to 65.3% for Q4 2021.

The company said .com prices will go up again in September 1, from $8.97 to $9.59 per year.

New gTLDs grow in China as .cn regs slide

China-based registrations of .cn domains decreased in the first half of last year, while new gTLD swelled to pick up the slack, according to the local registry’s semi-annual report.

CNNIC published the English translation of its first-half 2022 statistical report in December, showing a steep decline in .cn regs, from 20,410,139 at the end of 2021 to 17,861,269 at the end of June last year.

These appear to be registrations made by registrants based in China. Verisign’s Domain Name Industry Brief for Q2 2022 shows .cn at 20.6 million.

While .cn slumped, new gTLDs saw an uptick of almost a million names in China, from 3,615,751 domains to 4,590,705 over the six months. New gTLDs accounted for 13.6% of all China-registered domains, the CNNIC report says.

The report also shows that the number of Chinese-registered .com names dropped by about half a million, to 10,093,729 from 10,649,851, over the period.

The full report can be viewed here (pdf).

Drop-catcher adds 100 more registrars after rapid growth

Drop-catcher Gname has added 100 new ICANN shell registrar accreditations, according to ICANN records.

The Singapore-based company has created companies with the names Gname 051 through Gname 150 for the new accreditations, which are used to increase its number of concurrent EPP connections to the .com registry and therefore its chance of catching a valuable deleting domain.

Each accreditation costs a minimum of $4,000 in ICANN fees per year.

The latest ICANN registry reports show that the parent Gname accreditation had 1,864,283 .com domains under management at the end of August, when it had only 50 active accreditations.

That was a huge increase on the 354,644 domains it had a year earlier, when it had just 10 active registrars. It seems the company is testing how far this up-scaling strategy can go.

The move means ICANN now has 2,655 accredited registrars on its books, far ahead of the 2,447 predicted for the end of June 2023 by ICANN’s current fiscal-year budget.

Domain universe shrinks again: .com and .cn down, .au up

The number of registered domain names in the world shrank again in the third quarter, with mixed results across various TLDs, according to Verisign’s latest Domain Name Industry Brief.

There were 349.9 million names across all TLDs at the end of September, down 1.6 million sequentially but up 11.5 million compared to Q3 2021, the DNIB states.

The industry has downsized in every quarter this year, judging by Verisign’s numbers.

The company’s own .com, suffering from post-Covid blues, macroeconomic factors and (possibly) pricing issues, dragged the overall number down in Q3 by 200,000 domains, ending with 160.9 million.

But China’s .cn was hit harder, ending the period down from 20.6 million to 18 million. As I pondered in September, this may be due to how Verisign sources data.

Australia’s .au benefited from the launch of second-level availability, which boosted its number by 400,000 domains, ending with 4 million and overtaking .fr and .eu to become the seventh-largest ccTLD.

The ccTLD world overall shrunk sequentially by 1.7 million names but grew by 5.7 million on the year to end the quarter with 132.4 million.

New gTLDs ended with 27.3 million names, up 300,000 sequentially and 3.8 million year over year.

Verisign growth slows with post-Covid blues

Verisign sold fewer .com and .net domains than it did a year ago in the third quarter and has once again slashed its outlook for the year.

It had 174.2 million names across the two TLDs at the end of September, an increase of 1.2% over the year but down by around 100,000 names (rounded) on the quarter.

There were 9.9 million new domains sold. That compares to 10.1 million in the second quarter and 10.7 million in Q3 last year.

It now expects its total domains under management to increase by between 0.25% and 1% for the full year. That compares to the between 0.5% and 1.5% it predicted at the end of Q2, the 1.75% and 3.5% predicted in April, and the between 2.5% and 4.5% it predicted in February.

That equates to 2022 revenue of $1.418 billion to $1.426 billion, CFO George Kilguss told analysts. Verisign’s always jaw-dropping operating margin is expected to be between 65.75% and 66.25%.

CEO Jim Bidzos told analysts the slower growth can the attributed to the general macroeconomic malaise, Verisign coming off the lockdown bump experienced in 2020 and 2021, and the perennial issue of Chinese lumpiness.

Renewal rates for Q3 are expected to be 73.8%, the same as Q2 but down from 75% a year-ago.

But the company continues to make money hand over fist. Revenue was up 6.8% compared to Q3 last year at $357 million and net income was up to $169 million compared to $157 million a year ago.

Taliban seizing domains to silence journalists

The Taliban is attempting to close down independent media outlets in Afghanistan by deleting their .af domain names.

The Ministry of Communications and Information Technology tweeted that the sites of Hasht-e Subh Daily and Zawia News were “taken down” for publishing “unbalanced reports and fake news”.

د هشت صبح او زاویه نیوز خبري شبکو وېبسايټونه د مخابراتو او معلوماتي ټکنالوجۍ وزارت له لوري وټړل شول.
هشت صبح او زاویه نیوز خبري شبکې چې د افغانستان اسلامي امارت مشرانو پورې یې دروغجن تورونه تړل، بې توازنه راپورونه او کاذب خبرونه یې خپرول د یوې فیصلې پر بنسټ یې وبسایټونه ؤتړل شول pic.twitter.com/cexPduvMjT

— Anayatullah Alokozay (@Anayatalokozay) October 3, 2022

.af’s registry is government-run.

According to the Committee to Protect Journalists, the two sites have been reporting by Afghans in exile since the Taliban retook the country over a year ago.

Both outlets have now switched domains to TLDs based in the US — Verisign and Identity Digital, where presumably they’re pretty safe from the Taliban’s reach. They’re now using zawiamedia.com and 8am.media instead of the original .af names.

.com and .net are the drag factor on domain industry growth

Verisign’s own gTLDs .com and .net slowed overall domain industry volume growth in the second quarter, according to its latest Domain Name Industry Brief.

June ended with 351.5 million registrations across all TLDs, up 1 million sequentially and 10.4 million year-over-year.

Growth would have been slightly better without the drag factor of .com and .net, which were down 200,000 domains each sequentially, as Verisign previously reported in its Q2 financial results. There were 161.1 million names in .com and 13.2 million in .net.

The ccTLD world grew by 700,000 names sequentially and 2.6 million compared to a year earlier, the DNIB states.

New gTLD names were up by the same amount sequentially and 4.1 million year over year, ending the quarter at 27 million.

Verisign to crack down on Chinese domains

Verisign has asked for permission to implement a more stringent regime for denying or suspending .com and .net domain names registered in China, to comply with the country’s strict licensing rules.

The changes appear to mean that customers of Chinese registrars who have not verified their identities, which Verisign says is a “very small percentage”, will be prevented from registering new domains and may lose their existing domains.

The company has filed a Registry Services Evaluation Process request with ICANN, proposing to tweak the registrant verification system it has had in place for the last five years in a few significant ways.

China has a system called Real Name Verification, whereby Chinese citizens have to provide government-issued ID when they register domains. Local, third-party Verification Service Providers such as ZDNS typically carry out the verification function for Verisign and other foreign registries.

The big change is that Verisign will no longer allow names to be registered without a valid code.

The RSEP says that attempts by China-based registrars to register domains without the required government verification code will result in the EPP create command failing, meaning the domain will not be registered.

Under the current system, outlined in a 2016 RSEP (pdf), the name is registered and Verisign presumably takes the money, but the domain is placed on serverHold status, meaning it is not published in the zone and will not resolve.

The new system will also allow Verisign to retroactively demand codes for already-registered names, when they come up for renewal or transfer, with the option to suspend or delete the names if the codes are not provided. The RSEP (pdf) states:

With regard existing domain names without the required verification codes, which currently comprise a very small percentage of domain name registrations from registrars licensed to operate in the People’s Republic of China, Verisign intends to address compliance issues with these domain names directly with registrars. Verisign reserves the right to deny, cancel, redirect or transfer any domain name registration or transaction, or place any domain name(s) on registry lock, hold or similar status

It’s not clear what a “very small percentage” means in hard numbers. A small slice of a big pie is still a mouthful.

Verisign has substantial exposure to the Chinese market. On the odd occasion when .com shrinks, it’s largely due to speculative registrations from China not being renewed, such as in the second quarter this year.

The RSEP names the service the Domain Name Registration Validation Per Applicable Law service. While it’s in theory applicable to any jurisdiction’s laws, in practice it’s all about addressing the demands of the Chinese government.