VeriSign wins .com renewal, but can't hike prices

Published on NewsOK Modified: November 30, 2012 at 5:29 pm •  Published: November 30, 2012
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NEW YORK (AP) — The federal government has cleared VeriSign Inc. to manage the databases that house ".com" domain names for another six years, but the company won't be allowed to raise prices without approval.

Under the current contract, which expires Friday, VeriSign was guaranteed four price increases of up to 7 percent each on domain name registrations. VeriSign sought a similar guarantee as part of the contract renewal, but the Commerce Department rejected it. The new contract freezes the annual price at the current $7.85 per name, barring special circumstances.

"Consumers will benefit from VeriSign's removal of the automatic price increases," Lawrence E. Strickling, assistant Commerce secretary for communication and information, said in a statement. "At the same time, the agreement protects the security and stability of the Internet by allowing VeriSign to take cost-based price increases where justified."

Anyone who wants a ".com" name can obtain one from various companies, which pay VeriSign $7.85 of what they collect on each name. The new contract lets VeriSign continue receiving those fees, but won't guarantee more.

The ".com" suffix is the most popular Internet domain name in use, with about 105 million names registered. Although hundreds of other suffixes exist —and hundreds more are coming in the next few years— none has matched the success of ".com." VeriSign's ".com" directories are used by millions of computers and mobile devices around the world to locate websites and send email to addresses ending in ".com."

The $7.85 fee translates to $824 million a year in revenue for those 105 million names. Had VeriSign been allowed to raise prices four times by 7 percent each, as called for in a draft of the new contract, the company could have charged as much as $10.29 by the end of the six-year term. That would have meant an additional $256 million a year on those 105 million names.

VeriSign's stock fell $5.19, or 13 percent, to close Friday at $34.15. Calling the new price cap a surprise, Citi Investment Research analyst Walter Pritchard reduced his price target on VeriSign to $35, from $42.

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