Our new ICANN accreditation will shorten the domain supply chain

Deregulation and market concentration are reshaping the domain industry, so we're working to improve our position.

Max calendar Jun 28, 2022 book News

Next month we’re increasing what we charge for a range of international (i.e. non-.nz) domains. The immediate cause is an increase in what we’re charged for those domains by our upstream providers. Read more about our new prices.

There’s every indication that domain prices worldwide are going to remain subject to upward pressure. Broadly there are three reasons for that, two of which are interesting to nerds like us. There’s inflation, obviously, but we’ll leave that one to economists to pick over. Even before your grocery bills went haywire a couple of other things had taken root at the heart of the Internet - deregulation and market concentration.

The short story is that ICANN (Internet Corporation for Assigned Names and Numbers) once meaningfully limited what registrars could charge for domains, but for a few years now they’re been loosening the ropes quite a lot. That’s deregulation. Theoretically with the new TLD’s coming through, there would be more choice for registrants to choose a TLD name that suits them better, and with a large number of different registries offering similar competing name products, then competition between providers would shine through. In practice there are fewer domain name registries and registrars than it appears because of mergers and acquisitions. And in the case of many TLDs, only one company has the rights to act as registrar in the first place. That’s market concentration.

We have news: We’re ICANN accredited

But before we dive deeper into deregulation and market concentration, let us assure you that we aren’t entirely powerless here. In fact, we - or, to be entirely accurate, one of our sister brands - have taken a big step towards becoming a registrar for more TLDs. That step is securing ICANN accreditation. This is a major milestone on the way to becoming a domain registrar with closer and more direct relationships with the registries. Ultimately this will add a new competitor - us! - into the market and put us into a position to offer better value to our valued clients and resellers in the future.

We have been a registrar for .nz domains for many years now, so the status that we’re working towards for other domains won’t be entirely new to us. Whatever and however many domains our customers have, they can use our full suite of tools (including the SiteHost API) to manage all their domains easily and efficiently. We’re proud of the way we bring together the management of so many disparate domains in a single place, and we know that a lot of people find things easier with us.

The tide of inevitable price rises

As we mentioned before, a couple of different forces are working together to send domain prices ever higher.

Deregulation

Back in 2020 we wrote that “there is a lot happening in the international domain space and price changes are likely on the way”. We realised this when we looked into what ICANN had allowed to happen with the long-standing limits on price caps. They were allowing ever more leeway to registries when it came to increasing prices. At the time, .org domains were the canary in the coalmine.

While ICANN is officially a not-for-profit entity, many registries are actually profit-taking companies. These registries benefit significantly when domains carry higher prices. They are constrained by IANA regulators, but these regulations have been relaxed, and regular annual price increases are signalled to continue. ICANN used to regulate tight control of pricing for certain TLDs, which they still do for some names like .com, but they have allowed these names to increase by 7-10%.

Our ICANN registration is a major step towards becoming a registrar, at which point we will work directly with administrators like ICANN. This direct relationship will enable us to offer better value and will also give us lower costs per domain. It adds up to more opportunity to offer competitive pricing to customers like you.

Market concentration: Merge like a zip

You might hope that there would be enough competition amongst registrars even in a less regulated environment. Sadly, trends here point in the wrong direction. Mergers and acquisitions (M&A) within the industry are leaving fewer and fewer companies in the game.

There’s an ongoing industry trend for multiple brands to find themselves under a single privately-owned umbrella. As the internet has eaten the world, private equity has eaten the internet. We’ve seen this at a local level, like when the largest NZ-owned hosting company disappeared into the Crazy Domains machine, and we see it at the very largest scale too.

As far as international domain-name providers go, we used to have multiple upstream partners. Today, due to M&A activity, we find our upstream providers are now all owned by the same company. Again, this isn’t new: Quintin blogged about industry acquisitions in 2020. Unsurprisingly, we’re hearing from customers of these massive companies (and sometimes from inside as well) that they are facing big issues operating their systems and with staff. They’re currently struggling to provide good service, so keeping prices low is certainly not a priority for them today.

To have multiple upstream providers is desirable from a redundancy perspective, and has always been something we have pursued. However, just like in other areas of our business where we have carefully selected upstream partners, with so much M&A activity, we have suddenly found ourselves at the end of two tubes pumping from the same swamp.

This is why we want to bypass the swamp entirely and become a registrar. With our ICANN accreditation in place, we're a number of months away from getting there.

Even more concentration: Monopoly by design

You’ll know already that the range of available TLDs has exploded in the last decade or so. If you want a web address that ends with .shoes, .ninja, .kiwi, or .travel, to take four examples, then you’re in luck. But these new gTLDs were never arranged in the way that .com and .net were. Instead, the administration rights to sell each domain were sold off to a single supplier right from the start.

In some cases the effect of this single supplier was hidden at first. While .kiwi, for example, has always carried a premium price, .biz for a long time did not. We used to advertise (and charge for) both .biz and .info as a ‘gTLD’ or ‘Generic Top-Level Domain’ on a par with .com. But now these two domains are being worked harder by their registry company, so we’ve been forced to split them out from the pack. The outcome is that .biz now costs a whopping $35 to renew/register/transfer, while .info has increased even more.

Newer TLDs such as .shoes and .travel are seeing some of the steepest price rises from their owners. In business-speak it appears that a number of companies are looking to move their TLDs from an acquisition phase, when the aim is to offer a price that attracts new customers, to a new “cash cow” phase where the existing customer base - i.e. those who have invested their brand and identity in a particular TLD - are asked to pay more to continue receiving the full value of the domains they already have. In non-business-speak, it’s milking season.

So if you’re one of the small number of SiteHost customer’s with a ‘new TLD’ for your or your customer’s business, you ought to check the new prices sooner rather than later.

If you’re new to bespoke TLDs, let us give you a warning. There’s a trend amongst other providers to offer very cheap teaser pricing for initial registration (perhaps a single-digit price for the first year) with sharply increasing costs for renewal (triple figures at worst). Changing domains is hard, and options to transfer can be hard to find, so a lot of buyers are left to swallow the increase. This trick has actually caught us out here at SiteHost as well!

Because we support a lot of IT professionals and are trying to build long-term relationships with our clients, we are keeping to our simple, tiered pricing at present. We’re not in the habit of baiting you with loss-making introductory offers, and we don’t add complicated charges for the valuable extras we offer such as our stable, API-backed reseller system and free DNS. However things change, we will always offer a transparent, fair exchange of value in the future. For now, we want our own clients to see and understand the industry trend towards more complicated billing models even for something as simple as a domain-name.

Light at the end of the tunnel

Obviously we can’t do much about international domain-names pricing trends, or inflation and other rising costs, but we are doing what we can to keep domains affordable.

Firstly, we’re working hard to offer sharp, fair prices. We’re maintaining volume discounts where we can and offering a broad range of TLDs so you can use our tools to maintain a wide range of TLDs in one place. No matter what domains you register through us, you can manage them on a single platform with our full toolset at your disposal.

Our sister company has secured ICANN accreditation, which is a major milestone in a longer term project to cut the reseller middleman out of international domain sales. In the future we’ll operate as an ICANN accredited domain registrar directly. This is already how we operate for .nz domains and will mean we can offer better value.

There are a number of hoops we still need to jump through which will take a number of months. As soon as we have more news to share, you’ll hear it. For now, we just want you to know that we understand the pain of higher prices, and we’re doing what we can to alleviate it for you.

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