ICANN is lifting restrictions on VeriSign's pricing of .net domains after Jan. 1, 2007, a move that may signal ICANN's intent to get out of the business of regulating domain name pricing. ICANN has historically capped registry fees at either $6 or $4.25 per domain, depending on the top-level domain extension (TLD). The new contract reduces the current .net price cap from $6 to $4.25 through Dec. 31, 2006, but then lifts it altogether. The awarding of the .net registry to VeriSign has already prompted controversy and criticism from competitors.
VeriSign's Tom Galvin noted that the new contract (PDF) gives the company the flexibility to raise prices to invest in its infrastructure, but said VeriSign "will take a prudent approach to any adjustment in .net pricing." VeriSign must give six months' notice of any price change, providing an opportunity for existing domain name owners to lock in existing prices with a multi-year renewal.
Hosting companies have been slashing domain prices in a bid to acquire hosting customers, effectively commoditizing first-time domain registrations. The discounts on new domains have persisted even as resale prices for existing domain names have soared, a disconnect that has encouraged speculative buying of previously unregistered names.
Frustrated by low pricing amid a booming domain economy, registrars have responded by seeking to get a larger cut of the resale of expiring domains, raising fees for domain backorders and creating auction services for "dropped" names. Examples include Network Solutions partnering with SnapNames on a preferred backorder service that allows existing NetSol customers first shot at expiring names, and Go Daddy's creation of The Domain Name Aftermarket auction service.
Registrars' ability to raise base prices for new domains may hinge on their relationship with hosting companies, who are generally their largest resellers. Some hosting companies are already reselling domains at a loss, seeing it as a cheaper alternative to pay-per-click advertising, where hosting-related keywords go for $5 or more per click. Registrars may gamble that some hosting resellers would absorb a price increase as the cost of doing business. But price hikes could also move motivate hosts who currently resell domains to obtain their own ICANN accreditation and become registrars, a step recently taken by The Planet and EV1 Servers, who each host more than 1 million hostnames.