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November 22, 2005

Opposition mounts to .com price hike

A proposed deal that would let VeriSign Inc double the wholesale price of a .com domain by 2012 is coming under increasing amounts of criticism from consumers and from the company's own channel.

By CBR Staff Writer

Under a deal inked in October, VeriSign agreed to settle its lawsuits against ICANN, the Internet Corp for Assigned Names and Numbers, in exchange for a new .com registry contract that allows it to raise prices.

The deal enables VeriSign to raise prices by 7% a year starting in January 2007 through to when the contract ends in 2012. If VeriSign took advantage of this every year, the price of a .com would double from its current $6 by the end of the term.

But the deal has not been finalized yet. It needs to be approved by ICANN’s board, and it will be discussed in public and private at ICANN’s meeting in Vancouver next week. So far, the large majority of the reaction has been negative.

VeriSign’s registrars, the few hundred customer-facing companies that retail domain name registrations, are among those coming out against the price hikes.

Registrars operate on razor thin margins, where one support call can make a customer unprofitable, as it is. Many of the largest registrars sell domains for only a few dollars profit per year, and make their money on add-on services like web hosting, email and search engine optimization.

One group of small registrars, led by Monte Cahn of Moniker.com, have already expressed their concerns publicly to ICANN.

In an industry where the economics suggest that fees should be going down when there is competition, it is particularly troublesome and anti-competitive to grant a monopolist or a single source provider the unilateral right to increase costs without justification, Cahn wrote.

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In addition, ICANN’s public comment forums, which are usually under-trafficked, have been filling up with negative comments over the last two weeks.

The public comments are almost unanimously against the deal, and so far range from the well reasoned to a promise from one Michael Lewis to send ICANN a parcel of human feces (his own) every day until the deal is voted down.

From the amount of duplicative text on the forums, it also appears as if a person or company is organizing a formal letter-writing campaign against the deal.

Of course, there’s no reason to suggest that VeriSign definitely will raise prices if it gets the ability to. In fact, it may be in its best interest, with current market conditions, to keep them as low as possible.

The company has seen a massive increase in the volume of .com registrations due to relatively low domain prices and the growth in keyword and context-based advertising programs, such as Google’s Adsense and Adwords systems.

The company admits that it sees a lot of speculative registrations from people who register a name, park the site with advertising on it, and hope to make back more than the $7 or $8 they paid for the name.

Raising prices would change that speculative business model and could impact volumes, so VeriSign would have to factor that into its pricing decisions.

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