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When it was announced recently that Verisign and ICANN have reached a settlement agreement on a lawsuit related to management of the .com domain, the attention was mostly on the extension till 2012 that Verisign gets for managing the domain.
In fact, the deal is even sweeter than it seems. Starting in 2007 Verisign gets to increase the registry fee for each .com domain from the current $6 by 7 percent a year. (See the actual .com registry agreement, here in PDF form, between ICANN and Verisign.)
Maybe someone else can explain this to me. I have to admit, I have never personally administered and operated the root domain for most of the Internet, but it doesnt seem like the sort of business that should justify 7 percent increases per year (this could increase the registry fee by 50 percent by 2012).
And its true, there are competitive pressures on Verisign against raising that number by the maximum—domain owners could shift over to alternative roots, which ICANN has been creating at full speed.
As others have pointed out, Tucows offered to run the .Com domain for a $2 fee (not a formal bid, but a public offer) and Afilias offered to run the .net domain for $3.25 per year.
Assuming they thought they could make money at those prices, what does Verisign expect to be making with a $9 fee in 2012? (Thanks again to John Levine for the links and numbers.)
ICANN didnt just surrender to Verisign and give the store away to them. Theres something in the deal for ICANN too.
As John Levine and others found in the agreement, fees to ICANN go up quite a bit under this agreement, essentially tripling.
The ICANN fee for a domain is currently at 25 cents, but starting on Jan. 1, 2006, a new 37-cent fee will commence, to be raised to 45 cents six months later and to 50 cents on Jan. 1, 2007.
Im not a lawyer, but these appear to me to be annual recurring charges rather than one-time fees.
What is ICANN going to do with all this money? As Chris Nolan points out, flying first class to Tunisia doesnt come cheap.
So the bottom line is that .com domain prices are going up. Right now you can get a .com domain for well under $10, including the 25 cent ICANN fee. That could change in the next few years.
Bottom-of-the-barrel registrars like GoDaddy will have to raise prices, since the increases are a significant percentage of their price.
Im not sure if full-price registrars like Network Solutions and Register.com will necessarily do so, especially since they deal in large, round numbers.
Its one thing for GoDaddy to increase its price from $8.95 to $9.95, but what does Register.com do with its $35 per year?
In fact, if you look at GoDaddy they are quite conspicuous about the fact that 25 cents goes to ICANN, and they dont include that number in the large-font price they display (Register.com does seem to include the quarter in the price), so the overall price will go up, but they can be explicit about passing on the ICANN increases as ICANN increases.
In fact, perhaps they will separate out the registry cost (to Verisign for .com domains), making their own price look even cheaper.
But at least one good thing could come out of all this, namely pricing pressure on the domain parking/warehousing market.
An interesting article on the Netcraft site points out that its getting tougher to make money at the bottom of that market and quality in the ads on which the brokers rely is becoming essential.
So, in other words, its getting harder to make money by putting ads on a phony home page for some strange domain name that gets hit because users follow the wrong link off of a search engine.
Personally, Im happy to see the economics of domain warehousing shift against the domain owners, but unfortunately ICANN and Verisign dont intend to discriminate in the application of their new fees.
Oh well, bring it up in Gstaad or wherever else the next ICANN meeting is.
Security Center Editor Larry Seltzer has worked in and written about the computer industry since 1983. He can be reached at larryseltzer@ziffdavis.com.