Proposed ICANN Fees Generate Heat, But Not Price Hikes

The group overseeing Internet domain registrations is proposing to sharply raise the fees it charges Internet registrars, drawing protests from both large and small domain sellers. The Internet Corp for Assigned Names and Numbers (ICANN) wants to increase its budgeted revenue from $8.7 million to more than $16 million, with about 80 percent of that coming from registrars. ICANN’s 2004-2005 budget (PDF) adds a new fee that will average about $19,200 per registrar, along with a 25-cent fee for each domain sold.

“This budget significantly changes the funding model of ICANN, and threatens the existence of a large number of registrars,” according to Bhavin Turakhia of Directi, a registrar based in India, who has launched a website protesting the proposed fee changes. “The current budget favors larger registrars and will actually put the smaller and mid-sized ones out of business.”

Turakhia represents a group of 26 smaller registrars, who say the new fee structure also hurts international registrars’ ability to compete against companies in America, which is home to the industry’s largest players. Those larger domain sellers aren’t thrilled, either. The new fee structure would likely mean annual fee increases of $536,000 for Network Solutions, $273,000 for Tucows and $253,000 for GoDaddy, according to ICANN’s Kurt Pritz.

Given the current competition among discount domain sellers, it appears unlikely that the new fees will lead to higher costs for consumers. 1&1 Internet remains the pricing leader at $5.99 for a one-year dot-com signup, while AIT Domains lowered its price to $6.95. Going the other direction was GoDaddy, which raised its fees to $8.95, the high end of a range in which its prices have fluctuated from month-to-month.

Retail Domain Name Prices, May 2004
Company One-year
.com price
&nbspPrimary Business&nbsp Primary Region
1&1 Internet AG $5.99 Mixed Hosting Europe
EV1Servers $6.49 Dedicated Hosting America
Hostway $6.95 Shared Hosting America $6.95 Mixed Hosting America
AIT Domains $6.95 Mixed Hosting America
DomainSite $6.99 Domain Registrar America
Crystal Tech $8.50 Mixed Hosting America
Go Daddy Inc $8.95 Domain Registrar America
RegisterFly $9.99 Domain Registrar America
Dotster $14.95 Domain Registrar America
Host Europe $15.69 Mixed Hosting Europe
FastHosts $16.42 Mixed Hosting Europe
Verio $19.00 Mixed Hosting America
eNom $29.95 Domain Registrar America
Network Solutions $34.99 Domain Registrar America $35.00 Domain Registrar America
Melbourne IT $35.00 Domain Registrar America

Part of the challenge in creating an equitable fee structure, according to Pritz, is that ICANN is struggling to process a large number of accreditation applications from providers whose primary goal is not to sell new domains, but gain access to the list of expiring domains, known as the "batch pool." ICANN says that of about 250 accredited registrars, more than 110 are generating revenue from the batch pool, either by selling recently deleted domains or leasing their access to a third party.

Selling expired domains is attractive because it requires almost no marketing overhead, as most market participants are experienced domain buyers who actively monitor lists of newly-available names. ICANN's Pritz says that income should make it easier for registrars to afford the additional fees. Turakhia counters that this is a temporary phenomenon, since iCANN has approved Verisign's proposed wait list service (WLS), which would restrict the revenue opportunities for smaller registrars.