There is no competition for domain renewals.
Internet Society CEO Andrew Sullivan has responded to some of the uproar about his non-profit selling Public Interest Registry to a for-profit private equity company. In his response, he repeats the ICANN-given line about how registries can’t drastically increase their prices because of competition and temporary restrictions:
There is a high degree of competition in the TLD space – a fact that was not true when .ORG was awarded to PIR back in 2002. While all standard registry agreements with ICANN today no longer include price restrictions, and thus ICANN’s removal of .ORG’s was not unique to .ORG, there are market constraints in place. Given registries must announce any price increases for renewal 6 months in advance, paired with the fact that domains can be registered at current prices for up to 10 years, any operator seeking to increase prices dramatically would certainly lose customers without producing any increased revenue.
Sullivan is correct that there’s a high degree of competition for non-.com registrations of new domains, but there is essentially no competition for renewing domains. The switching costs of moving from one domain to another are significant. Some organizations spend hundreds of thousands, if not millions, of dollars on making a domain switch. It can still end badly.
Renewing a domain ten years in advance only kicks the can down the road. Eventually, the company or non-profit will have to pay a significantly higher price to renew its domain.
Also, you can argue that .org has little competition in the non-profit space. Non-profits feel that they need a .org domain.
Sullivan also points to Ethos Capital’s new statement about pricing:
Ethos is committed to keeping .ORG accessible and reasonably priced for all, in line with PIR’s longstanding purpose-driven mission.
The current price of a .ORG domain name is approximately $10 per year. Our plan is to live within the spirit of historic practice when it comes to pricing, which means, potentially, annual price increases of up to 10 percent on average – which today would equate to approximately $1 per year.
Even if you take Ethos’ at its word and believe it won’t substantially increase pricing, what about the next owner of .org? Ethos is a private equity company. Its backers require a return on their investment. This likely involves selling .org to another company down the line, and that company may well jack up prices.
John says
With regards to the erroneous justifications on consumer protection because consumers can renew for 10-years:
– The “right to enter into ten-year registrations” already exists and is not a viable constraint because the overwhelming majority of registrants favor one- to two-year registrations. Actual data shows that almost all renewals are done in 1-year terms.
– Most registrants have domain names on automatic renew with a credit card on file. When the domain comes up for renewal, it renews automatically for an additional year term. Customers expect and the vast majority of domains are renewed via this automatic process. Expecting customers to take explicit action – to login to their registrar – and to add multiple years and perform a manual checkout through a shopping cart – is something do not do.
– Asking consumers to spend 10x amount of money upfront – is not a form of price protection. Spend 10x your money now – and you can be protected? What customer wants to pay for a Netflix subscription for 10-years upfront? Same with a domain name.
– Registrars are not required to offer 10-year terms to customers. Some Registrars only offer 1-year registration terms (they don’t offer multiple year options)
– There is no requirement Registrars must notify customers prior to any price hike (thus, consumers will be left in the dark.) While the registry is obligated to provide notice to the registrar – there is NO requirement for registrars to notify customers – thus customers will not be notified about any future price hikes
– After 10-years – customers will be faced with higher prices. How are consumers protected beyond 10-years?
Rob Roy says
Many of the justifications we are hearing are specious and don’t ring true.
Klaus says
1) A future buyer may even be a non-American, non-western entity.
2) 10% is quite high for price increases, How can such a high rate of increase be justified? it can’t.
3) “Sullivan is correct that there’s a high degree of competition for non-.com registrations of new domains.” Many would differ with this opinion. There is not a high degree of competition. There are many inferior options available, true. Many unknown extensions with little track record. And many extensions which have low adoption rates and are riddled with spammers and scammers.
kp says
Costs are going down. Technologies evolve, computing costs go down. There are more registries now that can do this.
Why allow to raise prices at all? Makes no sense.
Even then, if their costs could be demonstrated to go up, inflation is what, 2% a year? This f***** mess ICANN has put us all in. Stupid.
I agree with Klaus above too. Sure, you can argue new registrations MIGHT have competition. But what domain has the branding of .org that would be taken seriously? I don’t think there is even competition for new registrations. Look at the facts and numbers. Existing TLDs have a brand surrounding them that pre-dated the organizations that monopolize and profiteer off of them today. They should not have rights to sell/transfer and even raise prides as they see fit.
Gene E. says
When PIR is as fatly profitable as it currently is, why is there even any talk of further price increases?
PIR’s per domain costs for operating the dot org registry are going down significantly.
So, how about price reductions rather than increases? Fat price increases at that.
snoopy1267 says
None of what he is saying is credible, the switching costs to non profits are huge and blind freddy knows why they wanted the 10% price cap lifted.
I’d say they are taking a leaf out of Verisign’s book and pushing back as hard as they can to ensure this deal happens.
John says
This will explain things:
https://onlinedomain.com/2019/11/24/domain-name-news/new-website-full-of-bs-lies-and-omissions-created-about-the-org-sale/#comment-412388
John says
Andrew Sullivan – why don’t you tell everyone what happened when you put the back end technical operations for .org out for public bid back in 2016?
Why don’t you tell everyone that it resulted in a significant reduction in costs by more than 50%.
So on one hand – you have costs going down – and they will continue to go down each year going forward – but you will be increasing prices in the future.
To add insult to injury, Andrew Sullivan continues to misguide everyone.
Andrew says there is a “high degree of competition in the TLD space” which is simply not true. This is 100% false.
Existing registrants are locked in and held hostage to their domain name. They can’t switch – because the switching costs are very high.
Because of the lock-in effect – domain names are not substitutes and they are highly inelastic.
Operation of each TLD registry is a “natural monopoly” because only a single entity may exercise control over registry operations. Traditionally, the possibility of excessive price increases imposed by the entity in control of a natural monopoly has been addressed either by a regulatory regime that controls such increases or by periodic price testing in the marketplace through competitive tender. Absent a competitive bidding process (which excludes all forms of competition) you must have price controls in place to protect consumers.
Natural monopolies in the public utility sector traditionally require the monopoly operator to submit a request accompanied by extensive documentation and justification, and receive affirmative permission from its oversight regulator, before any price increase can be put into effect.
But now – all pricing controls are completely eliminated!
As Congressman Rick Boucher said:
“Management of a TLD registry is a natural monopoly. Periodic market testing in the form of competitive bidding through which other companies seek to operate the TLD is an effective way to assure reasonable pricing of .com domain names. The .net process offers a perfect example. When the .net contract was rebid last year, competition and market forces reduced the final registration price by one-third.”
Andrew Sullivan– be a man and shoot us straight. Please don’t continue to lie. Admit that there is absolutely no “market” to constrain .org prices.
And this was the core catalyst why Ethos Partners acquired PIR. Because of market power on a captive base of 10+ registrants and unlimited pricing ability.
Charles says
It will be interesting to see how this plays out.
This again reminds me, we are the experts in this area, the average registrant is mostly clueless.
Does the average registrant actually know they can renew out 10 years? If they knew would they be motivated to do so? Registrants now lose their domains because everything is on auto pilot and they fail to update their credit card details. We look forward, they look to the past at their credit card bill and see prices were raised.
I feel Andrew Sullivan, and as many others do, equate domain investors and the average registrant.
I am involved with two not for profits. One has “no clue” about their domain anymore as I’ve been protecting in my registrar for over a decade now. To them “it just works”, I pay the bills. The folks here are not very technical. They have falling for some domain emails scams, as the registrar I can protect them with ease.
The other not for profit has the office manager managing its domains. She stretches every penny, if the registrar offered her a very compelling deal to renew out a couple of years, she might do it. Absent that, she just accepts what the registrar does and pays the bills. And now let me dig into this not for profit even further. Recently it moved to a different hosting service, who contacted her stating she MUST transfer the domain to them to mange the website – We all know the drill here. I did my best to explain to her NOT not to do it She kept saying “They need to control the domain”, and over and over I told he not so. I think I finally won only becuase I wore her out. Then she did as I asked, we change the DNS and THEN she saw I was right. This office manage IS very technical and frequently impresses me with what she gets through on her own with ZERO technical background. I consider her way above average when it comes to tech and domain names. She’ll never renew out 10 years on her own.
To Andrew Sullivan, I would LOVE to see your evidence that most registrants will renew out 10 years. From what I have seen I’m calling rubbish on that thought, most will not do so, most will accept whatever shows up on their credit card as a reminder of their having NO CHOICE.
Charles says
I just realized I should dig into another level of that second non profit experiance.
Its a church, and the web hosting provider is a Christian organization. To me and most domianers I think we’d call out the provider as lying. But what they were doing was addressing the fact that most churches have “no clue” so “most transfers” get the domain into their control to manage it for the church. They are in rough spot here, so I give them the benefit of the doubt.
So most churches transfer their domains, and they told me “a few” do not, like us.
Why does this matter?
Because domain renewals are part of the yearly package. In other words on transfer the church / registrant has lost all connection to the renewal price as its wrapped up into the overall service fee. NOT transfering the domain causes us to pay more AND stay in touch with the renewal fee.
Thus most not only will not renew out 10 years, most using this service are not even renewing their domains. Care to guess how many non for profits likely follow a similar model??? ….
John says
Great question Charles on .org renewal rates.
Let’s look at the data.
From the ICANN .csv reported numbers for .ORG in June 2019 – here are the following renewal numbers:
95.03% — of all renewals are for: 1 year
3.18% — of all renewals are for: 2 years
0.75% — of all renewals are for: 3 years
0.37% — of all renewals are for: 4 years
0.49% — of all renewals are for: 5 years
0.02% — of all renewals are for: 6 years
0.01% — of all renewals are for: 7 years
0.03% — of all renewals are for: 8 years
0.10% — of all renewals are for: 9 years
0.00% — of all renewals are for: 10 years
Above data shows over 98% of .org domain names are renewed for one or two years.
Furthermore, because almost all organizations have their domains on automatic renewal – they “set it and forget it” and it just happens naturally.
By in large, the entire base of domain names will be forced to pay higher prices – because they simply will not be aware of any pending price hike. The few domain investors may renewal or 10-years upfront, but this requires 10x the funds.
Moe says
In their “new statement on pricing” Ethos basically acknowledges that they intend to increase their prices 10% per annum and that’s the good news!!!!
kp says
as in… good news, we won’t monopolize you too hard…. just trust us on it
Bob says
I have no plans to write my congresspeople and consumer protection agencies regarding monopolistic practices in the domain space.
Mark Thorpe says
Any time a business gets taken over by an Investment firm, it’s only good for their Investors
GoDaddy was taken over by Investment firms and their domain prices increased more than normal, .COM $17.99!?
Their domain service is basically automated.
You have to buy their Domain Discount Club service in order to get normal domain pricing. They have increased that price as well.