Earlier this week, domain name registrar Namecheap sent out an email to all customers advising them of a secret deal that went down between ICANN and Verisign sometime late last year. It has the potential to change the prices of domain names drastically over time, and thus change the makeup of the Internet as we know it.

Domain names aren’t really owned, they’re rented with an option to renew, and the annual rate that you pay depends both on your provider’s markup, but also on a wholesale rate that’s the same for all names in that particular domain. This base price is set by ICANN, a non-profit.

Officially, this deal is a proposed Amendment 3 to the contract in place between Verisign and ICANN that governs the “.com” domain. The proposed amendment would let Verisign increase the wholesale rental price of “.com” domain names by 7% per year for the next four years. Then there will be a two-year breather, followed by another four years of 7% annual hikes. And there is no foreseeable end to this cycle. We think it seems reasonable to assume that the domain name registrars might pass the price gouging on to the consumer, but that really remains to be seen.

The annual wholesale domain name price has been sitting at $7.85 since 2012, and as of this writing, Namecheap is charging $8.88 for a standard “.com” address. If our math is correct, ten years from now, a “.com” domain will cost around $13.50 wholesale and $17.50 retail. This almost-doubling in price will affect both small sites and companies that hold many domain names. And the increase will only get more dramatic with time.

So let’s take a quick look at the business of domain names.
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