ICANN has a duty to cap renewal prices of domain names.
Today is the last day to comment on ICANN’s proposal to lift price caps on .org and .info domain names.
If approved, the registries that run .org and .info will be able to raise prices as high as they want on both new registrations and renewals as long as they give notice to the registrars. ICANN has proposed removing price caps on other domains as well.
This is a controversial topic for both domain investors and end users. It’s important to think about the dynamics of domain registration to understand the impact this will have.
Market power at the time of registration
It is technically true that there are a lot of choices when it comes to choosing a domain name. If I want to register example.com, I can choose to register a longer .com, opt for a .net or .info domain, a ccTLD or choose from hundreds of new top level domains such as example .xyz.
But let’s face it, people usually want .com. It has extraordinary market power.
Back in 2008, the U.S. Department of Justice Antitrust Division explained (pdf) this in a letter to ICANN regarding new top level domain names. It stated:
“Our investigation of the proposed .com agreement generated several findings that bear on the likely effect of creating new gTLDs. First, we found that VeriSign possesses significant market power as the operator of the .com registry because many registrants do not perceive .com and other gTLDs (such as .biz and .info) and country code TLDs (“ccTLDS,” such as .uk and .de) to be substitutes…
…We also concluded that existing gTLDS would not become a competitive threat to .com registrations because the network effects that make .com registrations so valuable to consumers will be difficult for other TLDs to overcome. Due to a first-mover advantage and high brand awareness, .com registrations account for the overwhelming majority of gTLD registrations…
Even with the introduction of hundreds of new top level domains since this letter was written, they have barely chipped away at .com’s market power.
Do other TLDs have market power? I’d argue .org does. Charities and non-profits often think of .org first instead of .com. The antitrust department noted:
“Finally, our investigation of the .com agreement found evidence that other gTLD registry operators may possess a degree of market power. The market power inherent in other gTLDs is less than the market power in .com, but is still material.”
In order of power in the gTLD market, I’d argue that .com is highest and .org is second highest. ccTLDs also have market power in some countries.
The presence of market power for initial registrations suggests that prices for some top level domains should be restricted. A non-profit is unlikely to choose .charity over .org unless it is unable to acquire the .org domain. It will usually choose an alternate, longer .org domain before choosing something else. This might not be true in twenty years but it is true in 2019.
For top level domains that don’t have market power and are easy substitutes for each other, controlling initial registration prices is not as important. That’s part of the reason people are complaining more about .org price caps than .info.
High switching costs and market power at the time of renewal
Domain names have immense switching costs. Companies that switch from one domain name to another often spend months planning the move. Some spend years. Some spend hundreds of thousands of dollars.
There are two reasons the switching costs are high.
First is search engines. Google is the lifeblood of many website’s traffic. Even the best-planned domain name transition can have serious traffic (and thus monetary) impacts. When HomeAdvisor switched its domain from ServiceMagic.com it saw a marked drop in traffic and revenue. On its conference call after switching domains, the company stated:
HomeAdvisor domestic revenue was negatively impacted by a 20% decrease in accepted service requests due primarily to the domain name change.
20% from a domain name change!
It took the company a while to regain the search rankings it had before.
Even companies that create and manage websites for a living have to expend significant resources to change domain names.
It can be done but it’s very difficult.
The second reason for high switching costs is email. Companies often have thousands of email addresses tied to their domain name. These email addresses are then tied to many online accounts. Switching domain names means updating all the mailboxes technically and all the accounts associated with them. It means emailing all customers and telling them about the new addresses. It undoubtedly means missing some important emails when the switch happens.
I have an acquaintance who was offered over $200,000 for a domain name he registered in 1997. He declined because he and his family have email addresses tied to the domain. It would mean changing hundreds of account registrations at websites and countless hours of work.
It’s one thing to switch email addresses if the company retains its prior domain name and can forward email to the new one. But if a company has to relinquish an old domain name due to renewal costs, it will miss out on this email forwarding and probably miss important messages.
These high switching costs make domain owners hostages to the registries that operate their domains. They simply have to pay whatever they are charged. The cost to switch is too much.
For this reason, renewal costs must be capped.
How domain registration and renewal costs should be managed
Some top level domains have market power at the time of registration. All top level domains have tremendous power over registrants at the time of renewal.
For this reason, ICANN should consider capping initial registry fees for top level domains that have some level of market power, such as .com and .org.
It should limit prices on all domains at the time of renewal.
The organization has stated that registrants have some protection because they can renew domains for up to ten years at current prices before price hikes take effect.
There are two problems with this.
First, the registries must notify the registrars of the price increase. It’s up to the registrars to notify customers. Busy customers might overlook these notices or not have the cash to renew for ten years today.
Second, and most importantly, this just kicks the can down the road. What does a company do ten years from now when it has to pay the new rates.
Excellent article, Andrew. Those folks who are saying that prices will be held in check by competition are ignoring the difference you point out between initial registration and after you are established on a domain and need to renew it or face very costly disruption.
For those looking for an easy, quick way to comment, check out https://www.internetcommerce.org/comment-org/
>face very costly disruption
Consider that might be the intent.
https://www.cnsnews.com/news/article/john-kerry-little-thing-called-internet-makes-it-much-harder-govern
“This Little Thing Called the Internet … Makes It Much Harder to Govern”
– John Kerry, Speaking to State Department personnel
“Well, folks,” he said, “ever since the end of the Cold War, forces have been unleashed that were tamped down for centuries by DICTATORS [emphasis added], and that was complicated further by this little thing called the internet and the ability of people everywhere to communicate instantaneously and to have more information coming at them in one day than most people can process in months or a year.”
– John Kerry, Speaking to State Department personnel
“One does not establish a dictatorship in order to safeguard a revolution; one makes the revolution in order to establish the dictatorship.”
– George Orwell, 1984
“So long as the state exists there is no freedom. When there is freedom, there will be no state.”
– Lenin, The State and Revolution (1917)
https://miamioh.edu/cas/academics/centers/havighurst/cultural-academic-resources/havighurst-special-programing/journalism-under-fire/journalism-history/index.html
“The Bolsheviks curtailed freedom of speech and press in Russia from the very beginning. One of the most important initial decrees passed by the Soviet of People’s Commissars and signed by Vladimir Lenin October 27, 1917 was the Decree on the Press (Murray 2).”
“Contrary to a common belief that the Soviet Union widely practiced censorship, after an initial period of censorship and repression under Lenin and Stalin, the true controls over a free press were embodied in the close relationship between party officials and the media. ”
“History doesn’t repeat itself but it often rhymes”
My unit standard for the internet, the reference frame that I like to use, is a smart hardworking single mother with a full time job starting an internet business. Up until now she could likely afford a domain with ease and find free hosting even if that might not be ideal to start. She has some chance to build a business, become independent, and spend more time with her children. As the domain costs increases she spends more time working to cover the domain cost. This increase will kill that opportunity for her and all others like her.
And to extend the idea, domain price increases have a direct impact on free speech and sharing ideas. Today someone can fairly easily register a domain name, get free hosting, and have a blog. If people like what they post they build a community regardless if they monetize it. The more the domain costs the harder it becomes for somebody worth hearing to be heard. There is a very direct impact on free speech and sharing ideas as domain pricing goes from very low to moderate to high.
For those that might be tempted to suggest social media proves a domain name is no longer needed, note well the censorship taking place on those platforms.
Raising domain costs is likely the last nail in the coffin.
Time to return to root splitting …
Good stuff, but it really feels like they simply don’t care about any common sense issue of morality and decency.
Andrew, you supported the “transition” from US oversight. I wonder how you’re liking that now.
Also read my comments over here, peeps; so far every one by “John” is by me:
http://domainincite.com/24171-ica-rallies-the-troops-to-defeat-org-price-hikes-it-wont-work.
PS, and remember this acronym:
RAPE
(Reprehensible and pure evil)
The transition has no impact on this
So being accountable to nothing and to no one has no impact? Including a US government that could have been preventing this?
VRSN, at least, still has an agreement with NTIA that contains restrictions on .COM prices, and they could’ve maintained the caps. Instead, it was the US Govt that gave ICANN the green light for a nearly $1 billion payday for VRSN.
I don’t like that license to print money at people’s expense as much as anyone. I’ve also covered in comments at other blogs how we have our own issues here in the US, so there are no guarantees. However, no price caps is on a far greater scale. The example you give is like a twenty foot shark compared to Godzilla. Konstantinos Zournas has even suggested a possible scenario of $200 billion over ten years for just four companies.
We have plenty of our own corruption here in the US, but regardless I highly doubt the US would ever allow the insane blank check of removing all price caps, at least not any time soon. Moreover, there remains the possibility of a more public friendly administration doing much better than the current status quo as well. With no constraint and no accountability, though, the cobra and the scorpion have been let out of the bag.
PPS:
“…feels like they simply don’t care about any common sense issue of morality and decency…” and TRUTH.
It can never be emphasized enough that legacy TLDs are categorically different from new gTLDs, as a public trust that people have relied upon, and that if anyone says otherwise they are simply bald-faced LYING. The ICANN “reasoning” rationalization is such blatant sham it shouldn’t even be allowed to be considered – if they were accountable to anyone or anything.
Charles’s long comments which make even me look positively pithy may seem hard to read at first, but they are worth looking at.
The truth is really true: history is bringing us toward an unavoidable Orwellian dystopia before a final end, and not the progress toward more utopia people want and like to think. There will never be any moral “evolution” of man like you saw in Star Trek.
This current effort by ICANN is sociopathic, perhaps even psychopathic, and definitely appears consistent with where global society is really heading. But it would be nice to be able to live out one’s life before the worst occurs, and it is still good to oppose the growing darkness even though the inevitable is inevitable.
Here is a short post:
“Who controls the past controls the future. Who controls the present controls the past.”
– George Orwell, 1984
“The most effective way to destroy people is to deny and obliterate their own understanding of their history.”
– George Orwell
https://eh.net/encyclopedia/the-history-of-the-radio-industry-in-the-united-states-to-1940/
“As had been true of earlier high-tech industries such as the telegraph and electric lighting in their formative years, what was accomplished in the early years of the radio industry was primarily brought about by inventor/entrepreneurs. None of the major electrical and telephone companies played a role in the formative years of the radio industry. So this industry’s early history is a story of individual inventors and entrepreneurs, many of whom were both inventors and entrepreneurs. However, after 1920 this industry’s history is largely one of organizations.”
“In 1922, few stations sold advertising time. Then the motive of many operating radio stations was to advertise other businesses they owned or to get publicity. About a quarter of the nation’s 500 stations were owned by manufacturers, retailers, and other businesses, such as hotels and newspapers. Another quarter were owned by radio-related firms. Educational institutions, radio clubs, civic groups, churches, government, and the military owned 40 percent of the stations.”
“Radio broadcasting was the cheapest form of entertainment, and it provided the public with far better entertainment than most people were accustomed to. As a result, its popularity grew rapidly in the late 1920s and early 1930s, and by 1934, 60 percent of the nation’s households had radios. One and a half million cars were also equipped with them. The 1930s were the Golden Age of radio. It was so popular that theaters dared not open until after the extremely popular “Amos ‘n Andy” show was over.”
“In 1924, Herbert Hoover, who was secretary of the Commerce Department, said that the radio industry was probably the only industry in the nation that was unanimously in favor of having itself regulated. Presumably, this was due both to the industry’s desire to put a stop to stations interfering with each others’ broadcasts and to limit the number of stations to a small enough number to lock in a profit.”
https://www.youtube.com/watch?v=sQn4AOAyRfI
https://www.youtube.com/watch?v=IcOyCB-qmPA
https://www.youtube.com/watch?v=dViF93yCrOc
Just a coincidence? …. Don’t fall for it.
Charles, I’m longwinded too, but you are much more so and you’ve got to change your approach. Try to put yourself in the shoes of someone seeing your posts and deciding whether to even read them. This one, for instance, there is no idea upfront of where you are going with all that, or what such long quotations contain. You might start out with a brief summary of how the history of the radio industry even relates.
Can we start discussing price caps on the domain secondary market too ?
Sure thing, Rubens. What do you propose?
So you want to compare property prices with annual property tax smart guy?
This says a lot about you.
I commented against the removal of price caps.
Excellent post–thank you.
Verisign hopes everyone has forgotten their history: Enormous price hikes on .com have already been tried. From zero to $100. Then again from zero to $35. These price points were tried by the National Science Foundation, we already know the impacts:
In 1995, as the consequence of the zero-to-$100 price jump, conglomerates like P&G and Kraft went on unchecked buying rampages. No small speculators in their way. (“These are perfect investments which only appreciate. Plus we’re stifling competition. And no one else can afford to play. Yes, please.”) Thousands of domains a day disappeared down deep, dark holes and remain there still, behind privacy companies like Moniker. Within two weeks of this tragic misstep, a panicked NSF offered canny speculators free registrations in order to head off the conglomerates.
Years later, in 1999, a price jump to $35/yr was tried. Numerous portfolios were relinquished, consolidated by the largest domain investors. That hurt startups, too. Too many domains under a few rich roofs means less motivation to sell. Higher price points, fewer phone calls answered. (“Hello, this is Yun Ye,” said no one ever.)
So, correcting for inflation, it is already proved that at $150/yr we usher in wholesale monopolization of the internet via conglomerates. At $50/yr, names do become available to startups, but at prices higher than need be. Verisign knows this history, because they were there. They know price hikes are a payday for them, but a catastrophe for the internet. That is an unacceptable level of villainy.
TL;DR = NSF/Verisign tried raising prices in the past, and altered the makeup of domain investors, causing severe and irremediable harm to the internet economy.