ICANN’s decision to remove price controls will have a long term impact on the domain name industry.
The biggest story in the domain name industry in 2019, and the one that will have the most impact in years to come, is the removal of price caps.
Historically, some domains have had price caps and some haven’t.
Country code domains have no caps.
Legacy global top level domains including .com, .net, .org, .info and .biz had price controls.
New top level domains never had price controls.
There is a reason that only the legacy gTLDs have/had price controls. In the case of ccTLDs, ICANN’s role is really just to delegate it to the country. It’s up to the country to determine how to allocate the domains. For new top level domains, they were created by the applicant registry, which sometimes had to pay millions of dollars to secure the rights of the domains.
Legacy gTLDs are different. In the case of .com, .net and .org, the companies that now run them are merely stewards for the domains. Or at least, that’s what the idea was. They would provide the technical services for these domain names and generate revenue by doing so.
Over time, however, ICANN has shifted the positioning of these domains to something that the registries own, just like new top level domains. This year, the domain industry regulator removed price caps on .org, .info and .biz—without the registries even asking for it. The registries that run these domains can now charge whatever they want for each incremental year someone uses the domains.
The U.S. government plays a unique role in the .com contract. In 2018, it agreed to allow Verisign to increase .com prices by 7% per year in the last four years of each six-year renewal. All signs point to price increases beginning in 2020.
Lax price controls are good for the companies that run these domains and their shareholders, but consumers and the stability of the domain name system are negatively impacted.
Few people will shed a tear over domain name investors having to pay higher fees to maintain their domain portfolios. The issue is end-users and longterm stability.
ICANN’s role is to provide security and stability to the DNS. Price controls are one way of doing this.
I frequently think about the future of the domain name industry. I look for the challenges the industry will face. And a lack of price caps scares me.
While domain names remain a critical component of using the web, this could change in the future.
Consider people using social media accounts instead of websites. The domain name industry points to what Facebook did with its newsfeed algorithm as proof that you need to have your own domain and website. Facebook encouraged businesses to grow their followers on Facebook, only to change midstream and start charging them to reach the very audience they built.
So what happens when someone using a domain is suddenly hit with a renewal bill that’s 10 times as much as the previous year?
They don’t have much choice but to pay the fee. Yes, they can switch domains, but it’s an expensive and time-consuming process. So they suck it up and pay the higher bill.
Over time, this will make people think domain names are a less stable option than other ways customers might interact with them. They begin to look at domains like they look at Facebook. Will the registry screw them after they spend years building up their presence on their top level domain? You can view top level domain names now sort of a like a platform that you build your site on.
This is the long-run importance of price caps. For whatever reason, ICANN is abdicating its role in keeping domain prices stable. This is going to come back to haunt both ICANN and the domain name industry.