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ICANN and Verisign Agree on Perpetual .com Deal

Posted by TimSlavin at March 6, 2006

Clearly we're all in the wrong business.

On March 1, 2006 ICANN, the group that manages the internet, gave Verisign not only a perpetual agreement to manage .com domain name registrations, but also the ability to raise prices for these domain names. The value to Verisign in the billions of dollars over the next six years. The value to ICANN is no more than $12 million USD starting next year, peanuts. The value to you and me, increased costs for registering our .com domains.

What does Verisign provide for this huge new windfall? Exactly what they already provide: stable registration of the .com domain. They don't provide customer service. Registrars have to handle that expensive chore. Verisign simply manage the underlying technology, as others could for much less. And that technology cost is incremental over time. It's not subject to wild and unpredictable fluctuations.

Bob Parsons, CEO of registrar GoDaddy, has an excellent primer that describes what is at stake. The most amazing fact, to me, is that the base cost a registrar pays for a domain is $6.00 USD. So Network Solutions, another registrar, charges $34.95, a whopping $28.95 profit and 480% markup. I'll be moving my last Network Solutions domain registrations shortly.

One side story is what will happen to Verisign with their now bullet-proof monopoly. Companies that are set up, by design or circumstance, so that they cannot fail, often do fail miserably. Enron and HealthSouth show that equating this built-in business success with managerial prowess is a fatal mistake. It doesn't mean the CEO is a genius.

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