Verisign has much to be thankful for as .com contract renewed

Verisign went into the US Thanksgiving weekend with a freshly renewed .com Registry Agreement that allows it to keep control of its cash cow for another six years with price-raising powers the US government admitted it is powerless to rescind.

The deal with ICANN does not change Verisign’s price caps — it will still be allowed to raise prices by 7% in four of the six-year term — but it does allow ICANN to raise the fees it charges by an amount linked to US inflation.

ICANN has already said it plans to increase its fees on all other gTLD registries, so it seems certain .com, which raises more transaction revenue than any other TLD, will get the same notice before long.

The deal means cost-conscious registrants have a bit of breathing space; Verisign is only allowed to raises prices in the final four years of its term, which runs from yesterday until November 30, 2030.

So, no more price hikes until September 2026. Due to the required notice period, designed to allow registrants to lock in renewal pricing, we’ll almost certainly hear Verisign talk about a fee increase in early 2026.

The US government, via the National Telecommunications and Information Administration, also confirmed that it has renewed its Cooperative Agreement, which is where the price caps come from, with the company:

NTIA recognizes concerns about current pricing and believes a reduction in .com prices would be in the best interest of the public. We also recognize that prices at both the wholesale level and downstream, including prices charged by resellers and substantial markups by warehousers, need to be addressed. That said, both parties must agree to any changes in order for the Cooperative Agreement to be amended. Over the past several months, NTIA and Verisign have engaged in serious conversations, but, despite our best efforts, we have been unable to agree how wholesale .com pricing should change.

So the status quo remains, at least regards pricing.

The ICANN contract also requires Verisign to act on reports of DNS abuse — malware, botnets, phishing, pharming, and some spam — for the first time, in line with the standard RA signed by all other gTLDs.

A side deal that sees Verisign pay ICANN a few extra million bucks a year and commit to cooperate on DNS security has also been renewed, with a strong implication that it will too become part of the contractual status quo over the coming year.

New .com contract could see ALL domain prices go up

Verisign will retain its power to increase .com prices by 7% a year, and prices in other gTLDs could well go up too, under a new proposed registry contract designed to help patch up ICANN’s budget.

The proposed .com Registry Agreement was posted for public comment this evening, and the pricing terms within could have broad implications for all registrants of gTLD domains.

For starters, as usual the deal lets Verisign raise .com prices, currently $10.26 a year, by 7% in the final four years of the six years of its term. This is an option Verisign has never failed to exercise in the past.

But the deal would also give ICANN the power, in its sole discretion, to raise the per-transaction fees Verisign pays it for each added, renewed, or transferred .com domain, in line with the latest US inflation numbers.

The fee is currently $0.25 per transaction, and it hasn’t gone up ever, as far as I recall.

The proposed text on inflation is pretty much the same as found in all post-2012 gTLD Registry Agreements, but adds a clause saying that ICANN cannot raise the .com fees unless it also raises fees in “multiple other registry agreements”.

Yet another clause strongly suggests that ICANN intends to exercise its existing right to increase its fees, again according to the US Consumer Price Index, across other gTLDs — presumably all of them — rather soon:

ICANN and Registry Operator hereby agree that if ICANN delivers notice of a fee adjustment to other registry operators after November 1, 2024 and prior to the Effective Date, ICANN may concurrently deliver such fee adjustment notice to Registry Operator, in which case the provisions of Section 7.2(d) shall be deemed to have applied at the time such notice was sent.

Translated, this means that ICANN can put Verisign on notice that its fees are going up even before the contract is signed, but only if it also raises the fees on other registries at the same time.

It’s difficult to imagine why this language is there unless it’s describing something ICANN is actually planning to do.

Unlike Verisign, other gTLD operators do not have regulated pricing, so any ICANN fee increase on them could very well be passed on to registrars and ultimately registrants with increased wholesale prices.

The new contract is being proposed a few months after ICANN laid off staff because its budget was $10 million light, and CEO Sally Costerton said the Org was “evaluating ICANN’s fee structure to ensure it scales realistically with inflation”.

Verisign, and .com in particular, is ICANN’s biggest single source of funding, contributing $47.3 million of its $145.5 million in revenue in its last fiscal year.

The proposed new .com contract and public comment opportunity can be found here.

ICA finally comments on .com pricing talks

With the latest public debate about whether Verisign is ripping off registrants with its .com pricing now into its third month, one voice has been conspicuously absent.

But the Internet Commerce Association, which represents domain investors and domaining registrars, has now publicly called for .com wholesale fees to continue to be capped and Verisign’s profit margins to be tempered.

Issuing a statement late last week, the ICA revealed that it has participated in talks with the US National Telecommunications and Information Administration regarding its upcoming renewal of the .com Cooperative Agreement.

ICA said it is “encouraging NTIA to focus on ensuring that price caps have some relation to both the cost of operating the .com registry and a reasonable, if not healthy operating margin”, adding:

We believe that it in the absence of actual competitive market forces determining price, it is crucial that an economic study be conducted to determine what a reasonable price would be for .com registrations, having regard to the costs of operating the .com registry on behalf of ICANN while also taking into consideration the need to make a reasonable profit from the exclusive license. As a trade association focused on Internet commerce, although we are generally uncomfortable with determining prices by any method other than via a competitive marketplace, this method is the next best thing in the circumstances.

The statement completely ignores Verisign’s attempt to preemptively flip the debate on its opponents when it recently claimed that the true price gouging occurs in the “unregulated” retail and secondary markets.

The .com pricing debate first came back into the public sphere in July, when three campaign groups called on NTIA to cancel the Cooperative Agreement and allow the .com registry contract to be open for competitive bidding.

The agreement, terms of which routinely make their way into ICANN’s Registry Agreement with Verisign, allow the company to raise prices 7% in four of each six-year term, options Verisign habitually exercises.

The result is a .com registry that generates the company operating margins in excess of 60%, returning mountains of cash to investors.

Three Republican lawmakers then raised the issue with NTIA and NTIA later said that it intended to renew the Cooperative Agreement, but that it had invited Verisign to talks focused on pricing.

In apparently coordinated statements, both parties said the talks would also extend to pricing in the retail channel and secondary market, which should have made ICA members nervous.

Verisign even put out a lengthy statement calling out registrars and domain investors for selling .com domains at hugely inflated prices, conveniently ignoring the facts that the registrar market is genuinely competitive and that domainers shoulder the risk that the domains they pay annual rent to Verisign for very probably will not ever sell.

Verisign’s arguments are sufficiently flawed that it’s perhaps surprising on the face of it that ICA’s new statement completely fails to address or challenge them.

The fact that Verisign is prepared to throw its most dedicated customers under the bus without too much fear of retaliation — something it does every time .com pricing comes up for debate — is perhaps indicative of its market power.

It’s the only dealer in town, and it knows it can say whatever it wants about the crackheads who frequent its corner.

US could change .com pricing terms

The US government and Verisign are to enter talks about possible changes to .com pricing.

The National Telecommunications and Information Administration has told the company that it “intends to renew its Agreement with Verisign” but said it welcomed Verisign agreeing to talks that “may include an amendment to the pricing terms”.

The news came in an exchange of letters between NTIA assistant secretary Alan Davidson and Verisign chief Jim Bidzos over the weekend, published last night. Davidson wrote:

NTIA has questions related to pricing in the .com market. We are therefore pleased that Verisign has agreed to discussions regarding .com pricing and the health of the .com ecosystem, including retail and secondary markets. The parties will discuss possible solutions that benefit end-users, both businesses and consumers, and serve the public interest

The Cooperative Agreement between NTIA and Verisign gives the company the right to raise prices by 7% in four of the six years of its term, all of which Verisign exercised in the current run, which ends in a couple months.

The price-rising powers were frozen under Obama administration but reinstated under Trump, giving Verisign masses of extra revenue and huge profit margins, even as .com volume numbers took a prolonged dive.

NTIA’s intervention follows letters from three campaign groups calling .com a “cartel” and inquiries from three Congresspeople.

In response to NTIA’s letter, Bidzos wrote:

We have observed that our capped .com price increases have not always been passed through to benefit end-users and therefore we welcome an opportunity to have this important discussion. We are prepared to consider structures to address this and other issues, including ways to make .com pricing more predictable for the channel as part of it.

It’s clear from this rather tense exchange that the two parties might not exactly see eye-to-eye on their desired outcomes.

Verisign’s position recently has been that .com volumes have been falling in large part because of what Bidzos called the “unregulated retail channel” pumping up prices to increase profit-per-domain over domains under management.

He also pointed out in the company’s most-recent quarterly earnings call that the average price of .coms on the secondary market is $1,600, or 166x the wholesale price.

As some have pointed out, Verisign complaining about profiteering in the channel is the height of chutzpah, given its own mouth-watering margins, which appear to be what it seeks to protect more than anything else.

If Verisign reckons the registrar business is so great, why hasn’t it launched a registrar of its own yet? The company has been legally permitted by the Cooperative Agreement and its ICANN contract to do so for years.

Verisign predicts more gloom as registrars shun .com growth

Verisign has yet again massively downgraded its expectations for .com growth, after it lost almost two million domains in the second quarter.

The company said it had 170.6 million .com and .net domains at the end of June, down 1.8 million compared to Q1 and a 2.2% decrease compared to a year earlier.

CEO Jim Bidzos said Verisign now expects the domain name base for the full year to be between -2% and -3%. That compares to a range of between +0.25% and -1.75% predicted in April and +1% to -1% predicted in February.

The Q2 renewal rate is expected to be 72.6% compared to 73.4% a year ago and 74.1% in Q1.

Bidzos said he does not expect the base to return to positive growth until the second half of 2025.

Bidzos, talking to analysts, acknowledged that Verisign’s wholesale .com price increases “may have had an impact” but put the blame for the growth shortfall squarely on what he called the “unregulated retail channel” in the US.

American registrars have been cranking up their prices in order to prioritize average revenue per user over volume, he said, meaning retail prices for .com have gone up “more than twice” Verisign’s own price hikes, leading to fewer sales as a result.

“Our research shows that the benefit from our capped wholesale prices is not always passed on to consumers,” he said.

He faced a barrage of questions from analysts about recent calls for the US government to sever its ties with Verisign over .com and put the TLD out for competitive rebidding, but reiterated the company’s position that if the government cuts it off, it still gets to run .com under its contract with ICANN.

Despite the volume woes, Verisign continues to be a high-margin cash-generating machine.

The company reported Q2 net income of $199 million, up from $186 million a year ago, on revenue up 4.1% at $387 million. Operating income was up to $266 million from $249 million and operating cash flow up to $160 million from $145 million.

.au prices going up

auDA is to raise the wholesale price of .au domains later this year in response to inflation.

The registry said that the price will go up from AUD 7.78 to AUD 8.45 ($5.60 USD), not including sales tax, on October 1 due to “inflation-based cost pressures”.

auDA said the prices mean .au domains will continue “to cost significantly less than the wholesale price of other comparable Top Level Domain options.”

Even after the price increase, .au will be closer to a .uk ($5) than a .com ($10.26).

Up to 70 jobs on the line at Nominet as .uk regs dwindle

Nominet plans to lay off as many as 70 employees to cut costs, and is preparing for a .uk price increase, after years of dwindling domain registrations and the loss of a major government contract.

CEO Paul Fletcher told members yesterday that it won’t be providing the UK government with its Protective DNS recursive DNS service, PDNS, after its contract ends later this year. He implied that the government has selected a cheaper competitor to replace it, without giving details.

The deal was with the UK National Cyber Security Centre, and saw Nominet resolve half a trillion DNS queries a year for central government and other public services.

Nominet had been banking on this “cyber” business to bolster revenue in the face of “static or reduced demand for domains”, but the contract loss means some serious belt-tightening is in order, Fletcher indicated.

In its last financial year, Nominet said its cyber business had revenue of £12.6 million but had a loss of £2.4 million

“The changes that we are proposing to give us a sustainable cost base mean that up to 70 of our current roles could be made redundant,” he told members in an email. “While this would be partially offset by some redeployment opportunities, our overall headcount will reduce.”

He added that members should expect the price of .uk domains to increase in future, without giving a timetable.

“Our pricing will remain at current level of £3.90 until at least the end of the year, extending the freeze in place since 2021,” he wrote, but added that lower volume means “prices cannot be held at the level set in January 2020 indefinitely.”

Nominet had 10,688,932 .uk domains under management at the end of January, down from 11,045,559 a year earlier (a loss of almost a thousand domains a day) and its 2019 peak of 13,348,378.

Fletcher also delivered the news that one of its longest-serving staffers, registry managing director Eleanor Bradley, will leave the company later this year.

Finally, he said the company has successfully challenged a default court judgment (pdf) ordering it to repay a member’s subscription fees, a ruling that had been put forward as proof that Nominet has been breaking the law by charging membership fees for the last quarter-century.

Fletcher said the judgment came because Nominet had no idea it had been sued, adding: “On 31 January, we successfully applied to have the default judgment set aside in the County Court, having made every effort to avoid unnecessary, costly and time-consuming court proceedings. This ruling, which the claimant is appealing, allows us to defend the original claim.”

The lawsuit came as part of a campaign operated at WeightedVoting.uk that seeks to prove Nominet’s membership and voting structure is illegal.

Namecheap sues ICANN over .org price caps

Namecheap has sued ICANN in California, asking a court to force the Org to revisit its decision to lift price caps on .org and .info domain names five years ago.

Registrar CEO Richard Kirkendall announced the suit on Twitter this afternoon:

Today we filed suit against @ICANN. After a previous ruling via a mediation process they have taken little action towards the recommendations of that ruling and so our hand has been forced to take this action. We feel that ICANN is in direct violation of their mandate and…

— Richard Kirkendall (@NamecheapCEO) February 5, 2024

The lawsuit follows an Independent Review Process case that Namecheap partially won in December 2022, where the panel said ICANN should hire an economist to look at whether price caps are a good idea before revisiting its decision to scrap them.

The panel found that the ICANN board of directors had shirked its duties to make the decision itself and had failed to act as transparently as its bylaws mandate.

Namecheap says that over a year after that decision was delivered, ICANN has not implemented the IRP panel’s recommendations, so now it wants the Superior Court in Los Angeles to hand down an injunction forcing ICANN to do so.

Before 2019, .org was limited to 10% price increases every year, but the cap was lifted, along with caps in .info and .biz, when ICANN renewed, standardized and updated the respective registries’ Registry Agreements.

After the decision was made to scrap .org price caps, despite huge public outrage, Namecheap rounded up its lawyers almost immediately.

The caps decision led to the ulimtately unsuccessful attempt by Ethos Capital to acquire Public Interest Registry, which runs .org.

Namecheap’s new lawsuit wants the judge to issue “an order directing ICANN to comply with the recommendations of the IRP Panel”.

That means ICANN’s board would be told to consider approaching PIR and .info registry Identity Digital to talk about reintroducing price caps, to hire the economist, and to modify its procedures to avoid any future transparency missteps.

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.

With mystery auction winner, .sexy prices go from $25 to $2,500

UNR is increasing the annual price of a .sexy domain from $25 to over $2,000, according to registrars.

The price increase will hit from April 30, according to registrars, but will not affect renewals on domains registered before that date.

French registrar Gandi said its retail price for a .sexy name will increase from $40 to $2,750. That’s after its mark-up. Belgian registrar Bnamed said in January prices were about to get 100 times more expensive.

The current wholesale price for .sexy is believed to be $25 a year. I’m guessing it’s going up to about $2,500, which is a price tag UNR has previously experimented with for its car-related gTLDs.

UNR CEO Frank Schilling has previously defended steep price increases for TLDs that under-perform volume-wise.

.sexy had barely 6,000 names under management at the last count, having peaked at about 28,000 in 2017.

The question is: who’s decided to increase the prices? Did .sexy actually sell when UNR tried to offload its portfolio last year, or is UNR keeping hold of it?

.sexy was among the 23 gTLD contracts UNR said it sold, mostly at auction, about a year ago. But it’s not one of the ones where the buyer has been yet disclosed.

The gTLDs UNR said it sold were: .audio, .blackfriday, .christmas, .click, .country, .diet, .flowers, .game, ,guitars, .help, .hiphop, .hiv, .hosting, .juegos, .link, .llp, .lol, .mom, .photo, .pics, .property, .sexy and .tattoo.

Of those, a new company called Dot Hip Hop bought .hiphop and XYZ.com bought .audio, .christmas, .diet, .flowers, .game, .guitars, .hosting, .lol, .mom and .pics.

ICANN has approved those 11 contract reassignments — after some difficulty — and said that there are six remaining in the approval process.

That only adds up to 17, meaning there are six more that UNR said it sold but for which it had not, as of a week ago, requested a contract transfer.

But in May last year, UNR “announced gross receipts of more than $40 million USD for its 20+ TLDs”, said there had be 17 participating bidders, and that 10 to 20 had “came away as winners, including six who will be operating TLDs for the first time”.

That leaves with at least five as-yet undisclosed winners from outside the industry, six contract transfers outstanding, and six gTLDs with an unknown status.

Neither UNR nor ICANN have been commenting on the status of pending transfers.