You pay an annual fee when you register a domain name at Namecheap or any other domain name registrar. You might be surprised to learn that Namecheap gets to keep very little of the amount you pay for your registration, especially when it comes to .com domain names.
Let’s take a look at the domain name registration ecosystem, who is involved, and who controls the price of .com domain names.
Registries and Registrars
Each top level domain name (that’s the part to the right of the dot, like .com or .net) is managed by a registry. Think of a registry as a wholesaler that manages the inventory of domain names under that top level domain.
You don’t register your domain name by going directly to the registry. Instead, you go to a domain name registrar such as Namecheap. When you search for a domain, the registrar checks with the registry to see if the name is available. If you decide to register a domain, Namecheap tells the registry to reserve it for you.
The registrar handles the searching capability, customer support, credit card processing, renewal notifications and account management for your domain name. Think of the registrar as a retailer.
The .Com Registry
The registry for .com is Verisign, a publicly traded company in Virginia. It manages all 139 million .com domain names, acting as a database for name availability and helping internet users get directed to the right website when someone visits a domain name.
In addition to running .com, Verisign also manages .net and a few other top level domain names.
So in the case of a .com domain, when you register one at Namecheap, Namecheap acts as the retailer and reserves the domain from the wholesaler. You pay the registrar and it pays a portion of this to the registry.
While retailers can charge as much as they want for .com domain names, in practice competition limits what they usually charge. Low-cost registrars like Namecheap pay over half of each .com registration fee to Verisign.
Price Controls
Because Verisign is the only wholesaler for .com domain names, there are some price controls in place to keep it from charging whatever it wants when someone registers a domain name. There are two groups that keep the prices in check: The Internet Corporation for Assigned Names and Numbers and the U.S. government.
The Internet Corporation for Assigned Names and Numbers (ICANN) is a non-profit that oversees the administration of domain names. One of its key roles is to manage contracts with registries and registrars.
ICANN contracts with Verisign for running the .com registry. This contract sets a limit on how much Verisign can charge for each .com domain name.
Unique to .com compared to other top level domains, the U.S. government also plays a role in setting the price for .com. The National Telecommunications and Information Administration (NTIA), which is part of the Department of Commerce, has a separate agreement with Verisign called The Cooperative Agreement.
The Cooperative Agreement recognizes .com’s unique role in the internet and Verisign’s job running .com.
In practice, this agreement can override terms that ICANN and Verisign negotiate in its .com contract.
In 2006, Verisign signed a .com contract with ICANN that allowed Verisign to increase the wholesale price of .com domains by 7% in four of the next six years. Unsurprisingly, Verisign took advantage of this opportunity to raise prices.
When the contract came up for renewal in 2012, ICANN agreed with Verisign to allow for the same price increases: four 7% price increases during the six-year term.
But this time the NTIA stepped in. It questioned why the price increases were necessary. Verisign was (and still is) and extremely profitable business. So, through the Cooperative Agreement, the U.S. government essentially vetoed the price increase. The price Verisign charges for a .com registration today is the same as it could charge in 2012.
Future Price Increases
Unfortunately for consumers, .com registration prices might be increasing soon. Late last year, the NTIA amended its Cooperative Agreement with Verisign. The amendment will allow Verisign to increase prices by 7% a year in four of six years, much like the 2006 agreement.
While 7% might not seem like much, it means the wholesale price of a .com domain could increase by 31% during the next six years. As a result, domain name registrars will likely increase the prices they charge you for each .com domain. This is especially the case at registrars like Namecheap that keep prices low.
But Verisign’s price hikes aren’t a guaranteed thing. Remember, Verisign’s actual contract to run .com is with ICANN. ICANN will have to agree to amend its agreement with Verisign in order for Verisign to be able to raise prices.
Industry observers think that ICANN will acquiesce. After all, ICANN was willing to allow price increases when it drafted the 2012 agreement. It was only when the NTIA stepped it in that it froze prices.
What It Means to You
If you only have a domain or two, you probably won’t feel the pinch of these possible .com price increases. But with nearly 140 million .com domains registered, each $1 increase in the price of .com means consumers pay an additional $140 million dollars if registrars pass the full amount of the increase to their customers.
There’s a way to protect yourself against near-term price increases. Renew early and for multiple years. For .com
Renew your domain at Namecheap today.
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