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When you’ve been around the domain industry for as long as I have, you start to lose track of time. I was reminded late last year that the 6-year agreement Verisign struck with ICANN in 2012 to operate .com will be up for expiration in November of this year.
Now, I don’t for a second believe that .com will be operated by any other party, as Verisign’s contract does give them the presumptive right of renewal. But what will be interesting to watch is what happens to Verisign’s ability to increase the wholesale cost of .com names.
The 2012 agreement actually afforded Verisign the ability to increase prices by 7%, up to four times over the 6-year course of the contract. However, when the US Commerce Department approved the agreement, it did so without the ability for Verisign to implement those price increases.
At that time, the wholesale price of a .com domain was $7.85, and that’s where it stands today with the prices to registrars being frozen. Under the terms of the original 2012 agreement, .com prices could have been as high as $10.26 today had Verisign taken advantage of their price increases.
As an aside, I’ve long thought that the price of a single .com domain was incredibly inexpensive when you think about it in comparison to other costs of running a business.
While I don’t have any concrete insight into whether the price freeze will continue, there is obviously a new administration in Washington DC. Their view on this agreement could be different than the previous administration. Since this administration has come into office, we have seen a number of pro-business initiatives undertaken, so perhaps that will carry over to the Verisign agreement as well.
Another big difference today is that the domain market, in general, is vastly different than it was in 2012—with the introduction of hundreds of new gTLDs. There are exponentially more alternatives to .com today than there were 6 years ago, so it’s possible that too will have an impact on the decision.
With over 131 million registered .com names, it will be interesting to see how a potential increase of a few dollars per name would play out in the market, and the impact that it would have on corporate domain portfolios which are still largely comprised of .com names.
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>With over 131 million registered .com names
Having eyeballed the .COM zone file a couple of times through the years (yes, I really have done this), it is tough to imagine the internet even noticing the massive number of computer barf domains deleting from the zone file. Also being a registrar, and watching closely registry startups, I have felt there have been a lot of shenanigans inflating initial registration counts beyond what registrants actually registered.
Too much emphasis has been placed on registration counts in the past (a bigger database is better right?) and we are still in that mode of thinking. I don’t think the reg counts matter as people once felt they did. If I am correct, and this point gets put to the test, then the .COM reg count could easily drop by 50%+ and nothing about the internet would change. And if Verisign doubled reg fees it would not notice, beyond its database getting smaller.
Perhaps ICANN would care, as its domain tax would drop significantly ..... From their website:
“ICANN Executive Summary of Unaudited Financial Results For the Nine Months Ending 31 March 2017
Overview - ICANN Operations and New gTLD Program
The total ICANN change in net assets is $134.5M higher than budget “
And total funds under management = $463,000,000, or about half a billion, a very fortunate non-for-profit indeed.
>I’ve long thought that the price of a single .com domain was incredibly inexpensive
I think that is true, and the future may have a large number of .COM domain names being renewed out 10 years to delay impact of a significant price increase ..... And when that happens we will know the percentage of .COM domain names that have actually mattered for the last 2 decades.
If 80% of .com domains are owned by domain investors, what will happen in a 25% price increase is that it will cause a 20% decrease in registrations in that 80% fraction, a 16% overall reduction. Whatever the number is, investors won’t expand their investments.
>Whatever the number is, investors won't expand their investments. If they are knowledgeable and successful investors, they will continue their investments (and expand) as the domains they hold have an arbitrage value that makes the cost increase insignificant. Is anybody going to drop a 3 letter .com investment because the reg fee increased to $100 per year? Not a chance. Is any business going to drop their domain because the reg fee increased to $100 per year? Not a chance, their phone bill is far higher PER MONTH. Which does beg the question, who EXACTLY are the registrants of all those computer barf domains who's value is LESS than the registration fee supposedly paid for them? I suggest this question will be even more important If they survive a significant price increase ....