The definition of a cash cow.
Just how valuable is VeriSign’s monopoly on .com and .net domain name registrations? With rumors that the company is seeking a buyer for its security group, leaving it basically with just registry services, the monopoly is being thrust back into the spotlight.
At latest count there are roughly 87 million .com domains registered and 13 million .net domains. As of July 1, the price VeriSign charges on .com will be $7.34 and .net to $4.65. Do the math:
.Com domain base x $7.34 = $640 million
.Net domain base x $4.65 = $60 million
The base of domains changes from month-to-month thanks to new registrations and expirations. But there’s a lot of money in this monopoly. For the right to run these registries, VeriSign paid $18 million to ICANN for the non-profit’s 2010 financial year for .com and 75 cents for each .net transaction.
To put the value of this in perspective, Trefis has an interesting modeling tool. You can change the trendline of what you think will happen to overall domain registrations (not just .com and .net) and see what this would (supposedly) do to VeriSign’s stock price.
There are two main threats to VeriSign’s monopoly. The first is that .com will be forced to be put out to competitive bid. There’s a lawsuit pending to try to make .com lower its prices (retroactively) to what they would have been had .com been put out to competitive bid. A competitive bid would likely drive the .com price down to anywhere from $2.00 to $4.00 per year.
Second — albeit a stretch — is a proposal circulating to share the duties of back end registry services. This would create true competition at the registry level, which was one of the requirements of ICANN in the Memorandum of Understanding with the U.S. government. ICANN interpreted that to mean introducing new TLDs. But the real solution was probably much simpler.
George Kirikos says
You’re absolutely right, Andrew. The solution for “competition” was to introduce regular competitive tenders for fixed period contracts for registry operators like .com. This would have likely brought .com prices at the wholesale level to below the SMS800 wholesale cost of 1-800 numbers (which is around $1.30 per year). Tenders are standard practice for procurement. That would maximize the benefits to consumers through lower prices.
Instead, ICANN looks to do things that will maximize the revenues for itself and insiders through “interpretations” that no one else would make. The DOC/DOJ letter on new TLDs gave ample direction…all ICANN needs to do is follow it.
powerless says
George,
Your point is valid.
Icann is like a 17 yr old teenager.
They want to strike out on their own and make their own rules. They think they know best.
U.S. Gov’t can nolonger tell them what to do.
And, when they did, Icann acted out like a typical teenager.
Fortunately, DOC still controls/owns the family car.
And, the relationship between Icann and Verisign is similar to the kid next store who likes to indulge in his own pleasures (greed & monopoly).
So, he gives Icann bad ideas.
Andrew, great posting. And, nice tool.
Louise says
@ Andrew, Your column is the best thing to domaining! This post and interesting series of posts today comprise content that are ICANNWatch-worthy!
@ George Kirikos & @ Andrew, thanx for “competition” point. As a novice in domains, even I can’t understand ICANN’s vague direction about competition. I think it was intended to mean competition among Registrars for our custom; in stead of competition among Registrants in favor of Registrars.
@ powerless, thanx for entertaining analogy, including: “DOC still controls/owns the family car.”