Every .com/.net Domain Name is Worth at Least $150.

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Bad News. The $150 is for Verisign,  not you.

And of course, for many of you your names are worth more than $150, but think of every name, every long unpronounceable name, every typo, every 10 number, every name being worth $150.

So $150 per name sounds great. But its for Verisign. That is how much each of your .com and .net domain names are worth to Verisign shareholders. And each stock of Verisign gets $4.00 per year benefit as the money is used to buy back shares. Since 2007 Verisign has used over $6.5 billion to buy back shares.

So if the market capitalization of Verisign is about $22 Billion, and they had about (Source Domain Name Industry Brief Q3 2019) 145 million domains registered in com and .net.    Divide the names by the market cap you get $151 per name.  Even more if you count they have $1 Billion on cash, some of it your prepaid renewals.   Maybe knock off a little for their .TV and .CC business.

In regular quarterly reporting last week Verisign reported revenue and gross margins of 65-70%, net income of about 45%, and executive bonus stock compensation of about 5% of income. And, hinted at a soon to be in-acted registry fee increase.  This, in the face of declining registry fees elsewhere.

Almost Half of your Registration Fee is Pure Profit to Verisign

So apply those number to websites or portfolio registry fees. Number of names times $4 are going to Verisigns’ shareholders and executive bonus plans.   I feel with margins of 65-70%, any price increase to Verisign for operating their monopoly on .com and .net isn’t warranted from an out of pocket cost perspective.

I reached out the the ICA.   Kamila Sekiewicz responded with the statment. They had a petition on change.org. I actually joined and sent in $7 to publicize.

ICA launched the Stop the Price Increase of .COM campaign back in 2017 when the Department of Commerce was reviewing its agreement with Verisign. The ICA is continuing its advocacy against unjustified price increases on .com domain names now that the decision rests with ICANN. The ICA will be updating its stopthepriceincreaseof.com website soon. In the meantime, you can take part in this fight by joining the ICA or contributing to their efforts on behalf of the domain industry here: internetcommerce.org/join

ICANN has said it does not want to be in the price setting business. However, that is the role it stated it would assume when it was established.  They have abdicated somehow to the US government, the NTIA. In an amazing bit of irony the “contract” is actually a “Financial Assistance Award”.   Assistance, defined as the provision of money, resources, or information to help someone. So we are helping Verisign make a billion dollars a year.

From their By-Laws:

In performing its Mission, ICANN must operate in a manner consistent with these Bylaws for the benefit of the Internet community as a whole, carrying out its activities in conformity with relevant principles of international law and international conventions and applicable local law, through open and transparent processes that enable competition and open entry in Internet-related markets. (ICANN By-Laws Section 1.2 (a))

To our trusted Public Benefit Corporation ICANN.  How does allowing a monopoly provider of service to charge excess economic profits serve the Internet Community as a whole and enable competition?  The “Internet Community as a whole” is being taken for some portion of $22 Billion in market cap.

The fee increase, once denied by the Department of Commerce in its oversight role, would allow increases of 7% in four of seven years.  This compounds to a 30% increase, or over $2 per name. ICANN is now removed from United States oversight, and the principal who led the charge on behalf of the Internet Commerce Association (ICA) and within ICANN, now works for Verisign.

The feeling persists any public comment period will be window dressing, tossed aside by ICANN, the California Non-Profit Public Benefit Corporation setup to oversee and protect users.

The Department of Justice wrote in 2008, Found in a 2018 article about the NTIA approval. 

First, we found that VeriSign possesses significant market power as the operator of the .com registry because many registrants do not perceive .com and other gTLDs (such as .biz and .info) and country code TLD’s (“ccTLDs,” such as .uk and .de) to be substitutes. 

If anything its even more true after the past 10 years, including the new TLDs.  The NTIA rational that social media and other competition has somehow mandated a hnadout to Verisign is not proved out.  Registrations have increased.  This is not a request from Verisign to raise fees to somehow save its business, or be treated fairly to help .com – its to increase earnings.

The apparent approval seems to run outside the ICANN By-Laws and its transparency restrictions.

ARTICLE 3 TRANSPARENCY

Section 3.1. OPEN AND TRANSPARENT

ICANN and its constituent bodies shall operate to the maximum extent feasible in an open and transparent manner and consistent with procedures designed to ensure fairness, including implementing procedures to (a) provide advance notice to facilitate stakeholder engagement in policy development decision-making and cross-community deliberations, (b) maintain responsive consultation procedures that provide detailed explanations of the basis for decisions (including how comments have influenced the development of policy considerations), and (c) encourage fact-based policy development work. ICANN shall also implement procedures for the documentation and public disclosure of the rationale for decisions made by the Board and ICANN‘s constituent bodies (including the detailed explanations discussed above).

Back to the numbers.  Not only does each name provide value to Verisign shareholders of $150, but the the registry fee of about $7.85, a full $3-$3.50 goes directly to ICANN shareholders, and about .35 cents to executive stock compensation.  This is the net profit, after the expenses and salaries to carry out the business.

This money is paid out to buy back shares.  About $1 per domain name per quarter is used to buy back shares. This supports the stock price and allows liquidity for the executive compensation shares.  The stock buy back is taking money earned to support Verisign and ICANN job/task to protect the safety and security of the internet, and is paid out to support the stock price of Verisign. Never to be seen again. If the stock buyback wasn’t in place, Verisign would have $6.5 billion dollars a year on their balance sheet.  $6.5 Billion plus interest, and they need a price increase?

So lets track the registry fee.  $7.85 on .com and more on .net goes to Verisign per year per name.  They earn $3.50-$4.00 in profit per year, and payout that $4 per year to their shareholders.  So if I have 1000 .com domains, I am paying $8-10k a year in renewals, and $3000 or so goes to Verisign shareholders.  Not ot run the registry, this is after that, this is pure profit.

You say how can that be. Technology is reducing costs globally.  Economies of scale mean that if fixed cost are amortized over a larger names base, cost should decrease. Anyone who operates a business get a volume discounts. But we don’t as registrants.

The .com registry contract should have reduced incremental per domain cost as volumes increase.  In other areas where companies have monopolies, (like utilities) regulators use cost based approaches to a right and correct fee and cost to the public. Our regulator, ICANN has not shown any reason it benefits the public to have a higher fees.

For  deeper dive read the article on CircleID by Zac Muscovitch. It concludes

NTIA ostensibly made a regrettable political calculation that the profits of a single U.S. corporation outweighed the interests of millions of .com registrants across the globe including millions of Americans. The ICANN Board need not follow the lead of the Trump Administration’s NTIA on this issue. Indeed, it would be a dereliction of the ICANN Board’s responsibilities to the ICANN community to do so. Verisign was hired to do a job — run the .com registry. The ICANN Board can allow Verisign to effectively determine how much to pay itself for providing this service, or the Board can fulfill its responsibilities as the owner of the registry, by protecting the global community of registrants from unjustified fee increases. 

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