Dot-com domain price hike sparks angry debate

A dispute over the cost of internet domain names has spilled over into the US Congress, where allegations of monopolisation and unreasonable price hikes surfaced in a congressional hearing on Wednesday.

The dispute arises out of a lawsuit settlement reached on 1 March in which the Internet Corporation for Assigned Names and Numbers (Icann) gave VeriSign the right to raise fees on dot-com domains by seven per cent annually. The settlement, approved by Icann's board by a 9-5 vote, ended a legal spat that started with VeriSign's controversial move to take control of all unassigned dot-com and dot-net domain names in 2003.

Those guaranteed price hikes struck some members of the House of Representatives' Small Business Committee as unreasonable. Rep Sue Kelly, a New York Republican, said: "When you're talking about increased prices and you're allowed to do that at VeriSign, I don't know that's going to produce any better safety or security from anyone who's paying that additional cost. And I haven't heard anything today that tells me that would be the case."

While Icann - which was created by the Clinton administration - makes most decisions about domains on its own, the March settlement needs to be approved by the US Commerce Department before it becomes final. That requirement has politicised the dispute, with registrars that sell dot-com domains and must pay the higher prices trying to gain ground in Washington against VeriSign, which has a far more muscular lobbying operation.

During Wednesday's hearing, domain registrars attacked the deal as a way to let VeriSign milk consumers for the foreseeable future.

WG Mitchell, CEO of Network Solutions (which split from VeriSign in 2003), said: "I have no objection to VeriSign continuing to run the dot-com registry. What I do have is an objection to it being done in a manner that gives a perpetual monopoly to a company with unregulated price increases."

Mitchell estimated that consistent seven per cent price increases over that time period would eventually yield $1.3bn in new revenue for VeriSign - more than half of which would be paid by the estimated 10.5 million small businesses that use the internet.

Icann and VeriSign have defended the deal, making arguments about internet security which have been echoed in letters sent to the Commerce Department by sympathetic politicians.

The agreed-upon percentage increase means that the most dot-com fees would rise between now and 2012 is $1.86, given the current wholesale dot-com domain name rate of $6, Icann general counsel John Jeffrey said.

Craig Goren, CEO of Clarity Consulting, a 50-person IT company based in Chicago, said: "If I had to give up the latte I bought this morning in order to ensure that reliability remains the same, I'd do it in a heartbeat."

It's not clear what happens next. While Congress doesn't have the authority to block approval of the settlement unless new laws are enacted, even the threat of congressional action could spur the Bush administration to try to negotiate new concessions.

What's more, other members of Congress have raised red flags about the proposed agreement. Rep Rick Boucher, a Virginia Democrat, urged the Bush administration in a letter earlier this year to examine the proposal carefully, saying it could have "serious anti-competitive implications". He also asked the House Energy and Commerce Committee to launch a formal investigation.

In responses to members of Congress, the Bush administration has expressed tentative support of the settlement. John Kneuer, a Commerce Department acting assistant secretary, said "the resolution of long-standing and costly litigation would be a positive step". Kneuer added, though, that the Commerce Department is "in consultation" with the Justice Department's antitrust division.

Declan McCullagh writes for CNET News.com