New Verisign deal blocks .com price hikes

verisign 11-30-12 9:50 am
Click on the chart to view more information about Verisign's stock.

Verisign, the operator of the .com domain name registry for the World Wide Web, will be forbidden from regularly raising registration prices over the next six years.

The company renewed its contract with the U.S. Commerce Department on Friday, but under the terms of the new deal, Verisign will not be able to continue its practice of frequently raising prices by as much as 7% -- something Verisign did in four out of the six years covered by its last deal. Currently, registration prices sit at $7.85 per year.

The Commerce Department will need to approve any price hikes on .com registration through 2018, which it only plans to do for "extraordinary expenses related to security or stability threats."

Shares of Verisign (VRSN) fell by 15% on the news.

Verisign has been operating the .com and .net top-level domain registries since 2000 under an agreement with the Domain Name System overseer, the Internet Corporation for Assigned Names and Numbers. But Verisign's contract renewal was strongly opposed by the Internet Commerce Association, which represents website owners.

ICA claimed that Verisign's price hikes were arbitrary and not done out of economic necessity. The group pointed out that Verisign charges just $5.86 for the far less-used .net domain name, even though both domains use the same infrastructure and have similar operational costs.

Related story: Do Not Track is dying

The new Verisign contract is only a partial win for ICA. The organization was hoping to end Verisign's "monopoly" status.

The agreement also gives Verisign some wiggle room: The pricing restrictions could be removed if Verisign can prove to the Commerce Department that "market conditions no longer warrant such restrictions," according to the deal.

Verisign praised the new deal.

"This is an important event that provides certainty and sets a clear direction for the company," Jim Bidzos, Verisign's CEO, said in a prepared statement.

The market for services like Verisign's is growing fast. The largest-ever expansion of the Internet's naming system is in progress and will soon open the door to new domain names like .home, .inc, .blog, .book, .shop and .llc.

Separately, the global standards-setting Internet Society in June launched a new Internet Protocol standard called IPv6 that expanded the number of unique Internet addresses from 4.3 billion to 340 trillion trillion trillion.

Verisign said it is working to "meet the performance and scalability demands of .com" by upgrading its infrastructure to support IPv6 and other new specifications.

CNNMoney Sponsors