Whenever you purchase a domain name, you pay an annual fee at the domain registrar. So in today’s blog, we are going to talk about the domain name registration system, in which we will be talking about who is involved in it and who controls the price of domain names.
Let’s first discuss domain registries and domain registrars:
Domain Registry manages each TLD i.e. Top Level Domain name which can be .com, or .org or .net, etc. in simple words the part to the right of the dot (.) The concept of a registry is similar to a wholesaler who manages the inventory of the domain names which come under that TLD.
For registering your domain name you need to go to the domain registrar and not to the domain registry. When you select a domain name for registration then the domain registrar checks with the registry to see whether that domain name is available or not. You must be wondering who handles the domain searching, customer support, domain renewal notifications and managing your entire account? The answer is Domain registrar. So you can consider the domain registrar as a retailer.
Let’s take an example of any domain name and explain how the domain name prices are controlled and by whom?
I am taking examples of the .com domain for this purpose. So let’s dive in and go ahead with our topic:
First, we will discuss the .com domain registry:
The registry for .com domain name is “Verisign” which is a public limited company situated in Virginia. This registry manages all the 139 million .com domain names; it also handles the database for the name availability and helps users directly to the correct website when they visit a domain name.
Verisign also manages other domain names like .net and some other top-level domain names also. Thus in case of registration of .com domain, the registrar reserves the domain from the wholesaler i.e. the registry and when you make the payment to the registrar, they pay a portion of this to the registry.
Now the domain registrars can charge as much as they want for .com domain name to strive in the competition than what it is usually charged. There are some low – cost registrars who pay over half of each .com registration fee to Verisign.
Now let’s discuss how the domain name price is controlled:
The registry of .com domain name is Verisign, who is the only wholesaler. They have placed some price controls to keep it from charging whatever they want whenever someone registers a .com domain name. For keeping the prices in check there are two groups:
- The Internet Corporation for Assigned Names and Numbers (ICANN) and
- The U.S.Government
The ICANN is a nonprofit which looks at the administration of domain names. One of the important roles of them is to manage the contracts between registries and registrars.
Thus ICANN contracts with Verisign for managing the .com registry. The limit on how much Verisign can charge for each .com domain name is set by this contract.
U.S. government also plays an important role in setting the price for .com domain name which is unique to the other top-level domains. The part of the department of commerce which is the National Telecommunications and Information Administration i.e. NTIA has also signed a separate agreement with Verisign, which is called “The Cooperative Agreement”.
This agreement recognizes the unique role played by the .com domain name on the internet and the job of Verisign is to run the .com domain name.
The Cooperative Agreement can overrule the terms that the ICANN and Verisign work out in their .com contract.
Verisign signed a .com contract with ICANN in the year 2006, which allowed increasing the wholesale price of the .com domains by 7% in the coming four of the next six years. Don’t get surprised, as Verisign took advantage of this opportunity for raising the prices.
At the time of renewal of the contract in 2012, ICANN agreed with Verisign to allow the same price increases i.e. 7% price increases for four years in the coming six-year term.
But during this time the NTIA stepped in and questioned why it is necessary to increase the prices?
Verisign was and still is an extremely profitable business. With the help of the Cooperative Agreement, the U.S government rejected his price increase. So the price for the .com domain registration charged by Verisign is the same as it was in 2012.
Let’s discuss how future domain name price can increase:
It is unfortunate for the consumers that the prices for .com domain name registration might be increasing soon. Late last year, the Cooperative Agreement with Verisign has been altered by the NTIA, which allowed Verisign to increase the price 7% a year in four of six years, which is much similar to the 2006 agreement.
If we calculate this increase in the price for .com domain name registration by 7%, then it could be increased by 31% during the next six years. Due to the result of this, the domain name registrars will also likely increase the prices for each .com domain.
It is important to note that Verisign’s price hike is not a guaranteed thing. Do you remember the actual contract of Verisign with the ICANN which I mentioned earlier, according to which, the ICANN should be to agree to alter this agreement with Verisign in order for Verisign to raise the prices?
The industry observers think that ICANN will give permission after all ICANN was also interested in price increases at the time of the 2012 agreement. It is only because of the NTIA which stepped in it which stopped this price hike.
Let’s see how it will affect consumers:
In case, if you have only one or two domains then you may not probably feel this loot of these possible .com price increases. But if we consider nearly a 140 million .com domains registered then each $1 increase in the price of .com domain name means the consumers will have to pay additional $140 million dollars if registrars give the permission to this full amount of the increase to their customers.
For protecting yourself against this possible price increase there is a way which is, renew .com domain name early and renew it for multiple years. As per today’s prices you can renew a .com domain name for up to 10 years in advance. So thus if you renew your .com domain name now then you will need to pay today’s price rather than the future prices.
That’s it all about who controls the prices of domain names? What are registries and registrars? What are their roles? How .com domain registry works? How the prices are controlled? How future prices can increase? And how it will affect the consumers? If you find this blog informative and helpful!! And if you have any suggestions or questions about this you can leave it in a comment section below. Again thanks for reading this blog!
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