Verisign will put $20 million in the kitty in return for multi-billion dollar windfall.
Last year I made a prediction in my annual predictions podcast: ICANN would let Verisign (NASDAQ: VRSN) raise prices on .com, but Verisign would pay it extra money for the right to do so.
That’s the crux of a proposed agreement between the two parties.
The agreement would allow Verisign to increase prices by 7% in each of the last four years of each six year contract renewal. This is in line with an agreement Verisign struck with the U.S. government to amend the Cooperative Agreement. The wholesale price of a .com should increase from $7.85 to $10.26 over the next four years, and registrars will add their own markup.
In a carefully worded press release, the parties noted that ICANN is not a price regulator and is deferring to the U.S. government on .com prices. Historically, ICANN has been a price regulator, but it recently abdicated this role for some reason.
Now, about that payoff. ICANN is facing a budget shortfall after growing and expanding rapidly in recent years. The correct thing to do would be to trim the fat, but the Verisign contract renewal gave ICANN an easy opportunity to incresae revenue. Verisign will pay it an addition $20 million over the next five years as part of its new agreement. Problem solved.
Given some of ICANN’s recent decisions, this should come as no surprise.