High .COM Prices in 2012: How Verisign's fourth price increase will affect domain industry in 2012

For the fourth time, Verisign has increased the price of .com and .net domains by 7% . This will be the fourth and final price increase following the 6 year contract that Verisign negotiated with ICANN in 2006 which entitled Verisign to a price increase for four years in the initial 6 year duration of the contract.

Originally, the contract entitled Verisign to increase prices yearly for a period of six years and had that contract been implemented, the base price for .COM domains for example would be about $9 meaning registrars would be selling the domains at higher prices to both consumers and resellers. Consumers who buy from domain resellers instead of ICANN Accredited Registrars would particularly feel the pinch given that resellers add their margins and sell domains at slightly higher prices than ICANN Accredited Registrars.

Now there has been a lot of complaints regarding Verisign's newest price increase and for a good reason. Consumers are increasingly becoming aware of their rights and obligations in the DNS system. Users are no longer just content with consuming content but creating content and other beneficial ventures in the DNS.

Consumers are concerned that they are paying more for domains even as the dynamics in the domain market are about to change which will open the web to an avalanche of new Top level domain applications.

2011 was a year when the "closed and reclusive" DNS industry opened itself to the world, the "non techie" world of web users who are normally oblivious of domain names.This happened largely for two reasons. The first reason was ICANN's new Top level domain program which has captured the imagination of the online world. The second reason has been the controversy over US Department of Homeland Security's ICE seizure of domain names and the subsequent introduction of the Stop Online Piracy Act,SOPA, a bill that was introduced in the US House of Representatives and seeks to expand the ability of U.S. law enforcement and copyright holders to fight online trafficking in copyrighted intellectual property and counterfeit goods. The bill has met with stiff opposition from internet users and stakeholders globally thus creating greater interest in the domain industry.

That's why it's surprising that Verisign should invoke its discretionary powers and increase the price of domains, arbitrarily. Consumers need justification for such actions. A price increase of 7% might amount to just about $0.50 but if you are a user who buys thousands or tens of thousands of domains, then it's a huge dent on your profit margins and savings. Besides, the fact that Verisgns has incresed prices by 7% or $0.50 is not a guarantee that all domain registrars will also hike prices by the same margin. Since most consumers are normally unaware of domain prices and the domain industry is a fee market, some registrars are likely to use Verisign's actions to justify senseless price hikes.

Here's a look at Verisign's price increases over the years. Since 2006, the price of .COM domains has increased by $1.85 . Even at the current base prices of $7.35, consumers are paying anywhere from $11 to $34.99 to register .COM domains.

Revised Contract of 2006
Year .COM
2006 $6.00 7% Increase
2007 $6.42. 7% Increase
2008 $6.86
2009 $6.86
2010 $6.86 7% Increase. took effect from July 2010
2011 $7.34 7% Increase, to take effect from January 2012
2012 $7.85

At this rate, and as Verisign continues to increase prices in the future, the base price of .COM domains will be $9 in the next six years. So the next generation of internet users will pay more for .COM domains even as they will have choices for the various new gTLDs.

I think this could be a blessing in disguise for ccTLDs and newly launched gTLDs. If the ccTLDs, particularly in the developing world can lower their prices and at the same time improve registry infrastructure then the .COM's stranglehold of the DNS can slowly be dismantled. If users have choices, then the high cost of .COMs will drive those users to ccTLDs and newgTLDs, but only if those registries can learn from the mistakes of Verisign.

An easy but expensive method to bypass Verisign's price increases is to renew your .COM and .NEt domains for up to 10 years and lock in the registrations at the current prices.

For more posts on the Domains industry, read my Domains Africa blog