The .com contract renewal: 2012 Domain Dunce

Verisign lost an awful lot of market cap but consumers won.

It’s difficult to say who exactly is the deserving subject of this Domain Dunce Award. It goes way back.

In 2006 ICANN settled a long running dispute with Verisign by giving it a very nice contract to run the .com registry. The contract allowed Verisign to increase prices 7% per year in four of the six years of the contract.

The contract was up for renewal this year, and ICANN rubber stamped a fresh contract very similar to the expiring one (at least insofar as the consumer is concerned). It included the same 7% price hikes in four of six years.

But then something shocking happened. The status quo was broken.

The U.S. Department of Commerce informed Verisign it was reviewing the pricing of the .com contract renewal. Verisign shares promptly tumbled 14%.

People who have watched the domain industry for many years (such as your author) were a bit skeptical that Commerce would do anything regarding the pricing. Maybe it would lower the 7% number or decrease the number of years the prices could be hiked.

But the final result was a surprise: no price increases as all.

I suppose it could have been better. Commerce could have asked prices to be reduced. But for once domain investors have reason to thank the U.S. government.

So who’s the dunce? ICANN or Verisign?

Verisign is a smart firm. It makes as much as it can off its contract. It’s hard to tell how the negotiations went, but this certainly hit the firm’s bottom line.

The clear dunce is ICANN, which looks bad for rubber stamping a deal that had the same terms as last time.