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Is Verisign a Monopoly? Does It Matter?

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Senator Elizabeth Warren and Rep. Jerry Nadler recently wrote a letter complaining that VeriSign overcharges for .com domains due to its market power. They sent it to the Department of Justice and the National Telecommunications and Information Administration (NTIA). While you can make a reasonable case that the claim is true, two more interesting questions are “Why now?” and “Why bother?”

The letter was reported in a story in Wired. Oddly, a short press release on Warren’s website links to the Wired story; Nadler’s website doesn’t mention it yet, and I can’t find a copy of the letter anywhere, just some short quotes in the Wired piece.

To briefly summarize a lot of history, Verisign has been the sole registry for .com for thirty years. In the 1990s, what was then called Network Solutions got a government contract to sell names on .com, .net, and .org. In the early 2000s, as ICANN was starting, the domain business was split into registries that sell names wholesale to registrars that sell them retail to anyone. There is one registry for each top-level domain, and several thousand competing registrars that sell names from many registries. VeriSign spun off its registrar business which was still called Network Solutions, while keeping the registries for .com and .net. A separate deal around the same time transferred the .org registry to PIR, a subsidiary of the non-profit Internet Society.

VeriSign has a cooperative agreement with NTIA, which, until 2018, set a cap on the price for .com. In 2018, it was amended with a complex formula that allows VeriSign to raise the price by 7% per year in four years out of six. The wholesale price was $7.85, so now, after four increases, it’s $10.26. This is the price that registrars pay for renewals; initial registrations can be, and usually are, discounted, and each registrar can mark the price up or down as much as they want.

There was a fair amount of grousing about this in 2018 since there was no cost justification for the increases, just vague assurances that it’s OK because the market is now competitive. Hence the question, “Why now?” since there is nothing different now.

As to whether VeriSign is a monopoly, well, they sure act like one. The .com registry has about 150 million names, which is over twice as large as all of the other “generic” (ICANN contracted) domains combined. A quick look at VeriSign’s financial statements shows that they are fantastically profitable. Last year their revenue was $1.49 billion, of which $1.0 billion was profit, or about 67%, a fraction most companies can only dream of.

These numbers suggest that VeriSign could cut the price in half and still make money. But that leads to the question “Why bother?”

The $10.26 wholesale price for .com is in line with other top-level domains. It’s about the same as PIR charges for .org, and less than what most of the new registries charge for new TLDs like .biz or .review. Moreover, if we imagined that the wholesale price of .com was cut in half, that’s $5/yr, which will make no difference to anyone except domain speculators. If you’re setting up a website, you need hosting and site design and a lot of other services beyond the domain name. If the annual combined price dropped from, say, $100 to $95, so what? You can claim that it’s not fair for VeriSign to extract all that money and you wouldn’t be wrong, but the unfairness is spread pretty thin.

We have recent experience of what happens when registries sell domains cheaply, and it’s not pretty. New TLDs often have unrealistic ideas about how many names they would sell, so they panic and have a fire sale, offering lots of names very cheaply. Who wants to buy lots of cheap names? Criminals, that’s who. There is a clear line showing that the lower the price, the more abuse a TLD has. At this point, .com is in the middle of prices, and its rate of abuse is in line with that. If a $5 price drop doubled the amount of domain abuse we all have to deal with, that would be a poor trade.

Finally, what realistic remedies are there? There is no way to break up the .com registry since, for straightforward technical reasons, the names all have to be in a single database.1 The simplest option would be to stop or roll back the price increases, but as described above, there’s no reason to think that would have any practical benefits. Another might be to put the contract out for bid to see if someone else can do it, but that is very risky. No matter what you think of their business practices, VeriSign is technically very competent, and their registry has been running 100% of the time with no outages for decades. No other registry handles a TLD even half the size of .com, and even if you think someone else could probably do it, how much pain are you prepared to experience to find out?

After decades of growth, the number of domains in .com peaked last year and is now slowly shrinking. This means that while .com is a cash cow, its growth prospects are nonexistent other than via price increases, which further limits interest from other potential operators.

So, in summary, yeah, VeriSign makes a lot of money for .com, way more than any costs could justify, but it’s hard to see how that is significantly hurting its users and harder to see what changes would be an improvement.

Update: A friend pointed out that the NTIA cooperative agreement expires in a week on Nov 30 and due to some poor wording, NTIA could cancel it any time until then. But that would be counterproductive since it also says, “upon expiration or termination of the Cooperative Agreement, neither party shall have any further obligation to the other and nothing shall prevent Verisign from operating the .com TLD pursuant to an agreement with ICANN or its successor” so NTIA would just lose what little leverage it has now. The ICANN agreement also renews on Nov 30, and in that agreement, the renewal is mandatory.

  1. If anyone’s contemplating a response containing the word “blockchain” please don’t. 
By John Levine, Author, Consultant & Speaker

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Comments

Verisign's Monopoly Is Not Just About the Price of .COM Rick Lane  –  Nov 27, 2024 5:44 AM

Your arguments regarding the price of .com are logical; however, the issue of Verisign’s monopoly extends beyond just .com pricing. It also concerns the monopoly power that Verisign holds within the DNS ecosystem, a power given it through the NTIA Cooperative Agreement and Amendment 35 without any US public or Congressional input or oversight. This monopoly power has significant implications for undermining ICANN’s “multi-stakeholder” process.

We have seen this in several instances, such as Verisign’s failure to implement a “thick WHOIS,” despite being an agreed-upon consensus “multi-stakeholder” policy of ICANN back in 2016 (and now required as part of NIS2). Furthermore, Verisign has collaborated with other “contracted parties” to narrow the definition of DNS Abuse by excluding CSAM and IP violations even though the US and EU DNS Abuse definitions include both. Even more troubling is that there has been an increasing trend of Verisign colluding with ICANN to secure its policy objectives. This has occurred through bilateral contract negotiations - such as those involving .com price increases, DNS Abuse definition, and ensuring an open, accurate, and accessible WHOIS - and ICANN policies involving NIS2 and the US cybersecurity reporting law (CISA).

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