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Re: [registrars] What is a "reasonable" licence fee model for registrars

  • To: Bruce Tonkin <Bruce.Tonkin@xxxxxxxxxxxxxxxxxx>
  • Subject: Re: [registrars] What is a "reasonable" licence fee model for registrars
  • From: Larry Erlich <erlich@xxxxxxxxxxxxxxxxxx>
  • Date: Wed, 19 May 2004 13:50:13 -0400
  • Cc: registrars@xxxxxxxx
  • Organization: DomainRegistry.com, Inc.
  • References: <AFEF39657AEEC34193C494DBD717922203D1EEA3@phoenix.mit>
  • Sender: owner-registrars@xxxxxxxxxxxxxx

Bruce Tonkin wrote:
> Hello All,

> With the growth in competition in the domain name industry and with the
> current regulatory environment there are several major business models
> including:
> (1) selling enough domains to retail customers at an appropriate price
> to run a stand-alone profitable business unit (the original registrar
> business model)
> (2) selling domain names to resellers in very large volumes to run a
> stand-alone profitable business unit (essentially relies on proividing
> registrar functions at a lower cost than possible at the reseller)
> (3) selling domain names at a loss with the view to selling other
> services (e.g web hosting, email forwarding, private registration,
> search engine submission etc) - an increasingly common business model
> where the domain name business is a cost centre
> (4) selling domain names as part of a consulting service (e.g corporate
> domains)
> (5) using registrar accreditation to have access to registry information
> to provide information,   consulting or software development services
> (6) using registrar accreditation as a test environment for developing
> registrar software for sale either outright or under an application
> service provider model
> (7) selling access to registry connections - provided equally to all
> registrars regardless of size


(8) Combinations of the above.

> There are many "reasonable" methods of calculating the fee e.g:
> (a) charging all registrars the same fee (this would match the
> equivalent access model - ie same registry pricing and same bandwidth
> allocation to all registrars)
> (b) charging a transaction fee based on volume
> (c) a combination of a and b
> (d) charging a fee in proportion to the margin obtained in each business
> model
> Method (d) is the "fairest" but hard to measure.
> For example a registrar that sells 100,000 domains at $7 has a net gross
> margin of approximately $100,000.  A registrar that sells 10,000 domains
> are $30 has a net gross margin of $240,000.  Or a registrar that sells
> 1000 domains via a corporate domain consulting service of $1000 per name
> has a net gross margin of close to $1million.   Why should the registrar
> selling 100,000 domains pay more, when it earns the least.

I would say this is "impossible" to measure not hard to
measure. Who would police this? 

Also, this assumes that
the only prices that registrars charge are those that
are clearly marked on their website or the only services they
offer are clearly marked on their website. 


> The old model (b) is no longer equitable given the new range of business
> models.  The old traditional registrar is now a minority.
> Method (a) would probably give the best consumer result - it allows
> larger registrars to achieve economies of scale and thus offer lower
> prices - but does make it hard for small registrars to enter into the
> industry.

Which is bad for consumers, correct?

> I support the concept of a fixed component to cover the regulatory costs
> of registrars/registires (which scales more with number of registrars)
> and a variable component towards issues such as root server
> infrastrucute (which scales more with number of domains).
> The change I would like to see is a higher transaction fee (e.g $1 for
> the first 20,000 names) that drops to o.25 cents as volumes get above
> 20,000 names.  This ensures that the costs are not too high for smaller
> companies.
> Also I note that once ICANN starts enforcing the contracts - the number
> of complaints it receives about registrars will most likely drop in the
> longer term - and hence the $3.8 million will drop to a much more
> manageable level.

Money does not flow in the other
direction. The 3.8 will not drop. They will simply use the money
or the labor for something else. Do you really think there will be
givebacks? This will never happen.  

>  It is the fact that it has done no enforcement that
> the complaints about transfers etc have escalated to such high levels.
> Most complaints are about business processes which are not proportional
> to number of names.
> The fixed component of $20,000 is actually about half the time of an
> administration person.  Most of the biusienss models mentioned above
> could cover this cost.

Once again let me make the point that just because
ICANN says they need this money it should not be assumed that
they actually do need this money. 

Larry Erlich

> It is interesting to note that in our industry (IT generally) thare are
> very few examples of price increases for the same service - so I would
> expect that most of us will have to absorb the costs one way or another
> (e.g by cutting our internal costs or finding more ways to raise
> revenue).  Our customers expect prices to keep falling.   ICANN needs to
> understand this environment and take real steps to broaden its funding
> base (e.g auctioning gtld registry slots).
> Regards,
> Bruce Tonkin

Larry Erlich - DomainRegistry.com, Inc.
215-244-6700 - FAX:215-244-6605 - Reply: erlich@xxxxxxxxxxxxxxxxxx

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