Verisign keeps its dot-com cash cow until 2024

Verisign will retain control over the dot-com registry until 2024, providing it with a multi-billion-dollar cash cow for the next eight years.

Verisign's contract to run the internet's most valuable naming structure is not due to end until 2018, but in a sign of the power politics at the top of the internet, the agreement will be extended by ICANN in return for Verisign agreeing to accept ICANN's authority to make changes to the internet's root zone file.

The agreement, as well as the critical Root Zone Maintainer Agreement, has been negotiated in secret by ICANN and Verisign, despite both impacting millions of internet users and businesses.

ICANN has put the extension agreement out to public comment but it is under no obligation to act on the results, and history has shown repeatedly that the organization will ignore comments it does not agree with.

For over a decade, many in the internet community have been asking for the dot-com contract to be put out to tender. With more than 125 million dot-com names, the registry is nearly eight times bigger than its nearest rival – dot-net, which is also run by Verisign. By way of comparison, there are fewer than 18 million names under all of the 1,000+ new internet extensions added in the past two years.

Although there has been widespread interest in the transition of the IANA contract from the US government to ICANN, a process decided in public, the real power to make changes to the internet lives in an entirely separate contract owned by the US government.

For largely historical reasons, Verisign not only runs the dot-com and dot-net registries, but also two of the 13 root servers, including the "A" root, from which the other root servers nominally accept global changes.

Ch..ch..ch..ch..changes

Currently a change to the internet's root zone file – such as where the ".uk" registry points and hence who runs it – goes through a complex and technically unnecessary process:

• The registry operator of .uk asks for a change.
• ICANN, acting under the IANA contract, checks that change and sends it on to both the US government and Verisign.
• The US government double-checks ICANN's request and, if happy, tells Verisign to make the change.
• Verisign double-checks the request and makes the change on its A root.
• The other root servers adopt that change.

With the US government effectively handing over control of the IANA contract to ICANN, this process not only changed but the separate contract between Verisign and the US government to make changes became moot. As a result, the US government instructed Verisign and ICANN to hold negotiations between themselves and present it with a solution.

Details on the process to amend those contracts have been very limited, with all negotiations behind closed doors and the end results presented as final.

There is no actual technical need to have Verisign in the equation at all. ICANN could, theoretically, add more technical checks at its end to ensure mistakes were not made. But for obvious reasons Verisign wants to retain its current position.

Executives at Verisign were very concerned that by giving ICANN control of the IANA contract, the organization might seek to end or put out to tender its dot-com contract. As a result, they made an extension of the dot-com contract a pre-condition of the root zone agreement.

Deja poo

Incredibly, this is not the first time this process has played out.

Back in 2005, Verisign used its financial and legal advantage over ICANN to push it into an agreement where Verisign retained the dot-com contract on very favorable terms: it retained control, plus a presumptive renewal of the contract, and was given the ability to increase prices by seven percent in four of the six years of the contract term.

In return, it gave ICANN what it wanted: recognition that ICANN had authority over the domain name system.

Internet users attempted to halt that agreement and even filed several lawsuits in an effort to open it up to public scrutiny. Where Verisign at the time charged $6 wholesale per dot-com domain, other companies in the industry said they could run the registry for a third of that price – just $2 a domain.

When the contract was renewed again in 2012, ICANN was planning to give Verisign the exact same deal including the same price-rising rights, but the US government intervened and said the contract should not include any price increases.

As such, the wholesale price of a dot-com has been steady at $7.85 since 2012, although Verisign has still benefited, since the cost of running registries has continued to fall and some registries say they could run the dot-com contract for $1 per domain.

This week's decision by ICANN to extend Verisign's control of dot-com to 2024 does not cover prices – that is held under a separate contract still under the control of the US government and is still due to expire in 2018.

But just like in 2005, a deal that is almost certainly not in consumers' interests has been agreed to thanks to ICANN's competing self-interest. This time around, Verisign has agreed to acknowledge ICANN as having authority over changes to the root zone. And in return it has again received a contract worth billions of dollars. ®