[registrars] Registration and renewal price in .com registry agreement

["Bruce Tonkin" <Bruce.Tonkin@xxxxxxxxxxxxxxxxxx>]

Hello All,

For information.  Here is the relevant clause from the .com registry
agreement.
From:
http://www.icann.org/tlds/agreements/verisign/registry-agmt-com-25may01.
htm


"E. Adjustments to Price. The maximum pricing for initial and renewal
registrations set forth in Appendix G shall be adjusted at the beginning
of each calendar quarter by adding, to the amount specified in that
Appendix (after adjustment according to Section 22(a)) as the applicable
annual charge for initial or renewal registration of a domain name, an
amount calculated according to the following three sentences. For
calendar quarters in which the variable fee is collected at the
registrar level, the amount shall be US$0.00. For the first two calendar
quarters during the Term of this Agreement in which the variable fee is
collected at the registry level, the amount shall be four times the
per-name variable accreditation fee charged to registrars for the
quarter beginning six months earlier. For subsequent calendar quarters,
the amount shall be four times the quarterly Variable Registry-Level Fee
reflected in the invoice to Registry Operator for such a fee for the
quarter beginning six months earlier divided by the number of Registered
Names that the invoice shows was used to calculate that quarterly
Variable Registry-Level Fee. The adjustments permitted by this
Subsection 7(E) shall only apply for periods of time as to which the
Registry Operator does not have in effect a provision in its
Registry-Registrar Agreement permitting it to require ICANN-Accredited
Registrars to pay to Registry Operator a portion of Registry Operator's
payments of variable registry-level fees to ICANN."

Thus the ability for the Verisign registry to increase the per domain
name price to collect the increase from registrars is effectively
hard-coded into the contract.

In a pure market, an operator may decide not to pass on the increase to
their customers.  But who will decide not to offer .com names because
the price increases by say less than $1.

The issue may be harder for an operator such as .name, where a price
increase may be enough for a registrar to choose not to offer the
service.

Contrast this with our situation,.  Many of us absorb ICANN fee
increases, because we are in a very competitive market, and our
customers can choose from over 100 other registrars, and probably
thousands of domain name resellers.  Some of these companies sell
domains at below their market value, on the basis that they will pick up
business through value added products.

Anyway I predict the following result if registrars decline to pay ICANN
directly:
- Verisign will increase its leverage over ICANN (as they will pay a
larger portion of ICANN's fee) - they could for example delay payment
which would impact ICANN ability to pay their staff, which would impact
the ability of ICANN to regulate services such as WLS and Sitefinder.
- once Verisign eventually pays ICANN, they will subsequently increase
our fees
- other registry operators may have a harder decision based on their
market position - although most wouldn't be able to afford to pay ICANN
without passing on the fee

What we gain is a delay in making a payment (improves short term cash
flow), what we lose is long term leverage.

Now we can always ask the registry operators what they intend to do,
although such discussions may give rise to anti-trust implications
amongst the registry operators (e.g discussing possible price changes).

Anyway for the reasons above, given that the budget and contractual
structure for meeting the budget is set, Melbourne IT will agree to be
invoiced directly by ICANN.  We feel that giving more leverage to
registries at this time would be a dangerous step.

Regards,
Bruce