Since the United States government opted in the early 1990s to privatize management of internet domains, a company called Verisign has grown into one of the most profitable companies in the world. Verisign is the government-designated monopoly entitled to manage top-level domains (“TLDs”) across the internet, and it has turbocharged its profitability through an automatically renewing agreement that has, over the course of two decades, increased the price for registering or renewing a .com domain name by 70%, while the true costs of maintaining the .com TLD have likely fallen.

As a result, domain name registrants are paying more and more every year, while Verisign’s shareholders reap extraordinary, unjustified profits for what is a de facto public utility service. Today, the wholesale price of annually renewing a TLD through Verisign is $9.59 and Verisign has announced plans to hike that price to $10.26 in September 2024. Our analysis suggests that this new price represents an estimated $6.73 in profit per domain name, a nearly 66% profit margin that enriches Verisign’s shareholders at the expense of over 159 million .com registrants.

These trends worsened following a 2018 amendment to the Cooperative Agreement (“the 2018 Amendment”) between the National Telecommunications and Information Administration (“NTIA”) and Verisign, which abdicated much of the government’s oversight of Verisign. In particular, the 2018 Amendment (1) eliminated the NTIA’s contractual right to initiate a competitive bidding process for the management of .com TLD registries, (2) granted Verisign authority to increase prices by up to 7% per year without preapproval or any cost justification, and (3) restricted NTIA’s preapproval authority over separate agreements governing price, vertical integration, and other key terms.

The 2018 Amendment is a disaster for responsible government oversight of Verisign’s government-designated monopoly, with ripple effects across the entire internet. Since the 2018 Amendment, the wholesale price to register or renew a domain name has increased by over 30% without meaningful justification. Across 159 million .com registrants, that price increase represents an additional $383 million annual windfall for Verisign’s shareholders, with no direct method for NTIA to restrain future price hikes if the Trump-era terms are rolled over.

President Biden’s 2021 Executive Order on Promoting Competition in the American Economy directed agencies (including the Department of Commerce) to develop individual strategies to promote competition in the sectors of the economy they oversee because a “fair, open, and competitive marketplace” is an essential “cornerstone of the American economy.” The order also affirms that agencies must adhere to statutory mandates to promote fair competition. The statute that created the NTIA expressly states that NTIA’s mandate includes facilitating “the full development of competition.” Moreover, as detailed below, competition mandates were also embedded in the privatization policies and contractual arrangements that gave Verisign control of the .com TLD in the first place. NTIA has had three years since the issuance of President Biden’s Executive Order to reexamine whether the Cooperative Agreement with Verisign complies with these mandates.

If NTIA lets the current terms roll over, it is reasonable to predict that by the end of the next term of the Cooperative Agreement in 2030, the price to register or renew a domain will be $13.45, an over 71% increase over the pre-2018 price, and over 30% more than the September 2024 price, regardless of whether that price is justified by any costs. Moreover, 7% annual price hikes are more than double the current rate of inflation, $13.45 is more than triple a fair market price for registration and renewal of domain names, based on an analysis of Verisign’s earnings statements.

The NTIA is not entirely without options. These brief underscores the urgency of NTIA taking action now to stop the upcoming renewal of the Cooperative Agreement. The NTIA’s deadline to provide that notice to Verisign is August 2, 2024.

The question before the NTIA is clear: Should Verisign continue reaping large monopoly rents through its control of the most popular top-level domain on the internet, forcing businesses to pay an ever-increasing private tax that robs consumers to pay shareholders, including Verisign’s largest shareholder, Warren Buffet? Or should the NTIA use its remaining authority to rein in Verisign’s monopoly abuse?

The moment marks a new inflection point for the Biden administration’s fair competition agenda, one affecting hundreds of millions of Americans, small businesses, and end-users of the internet. Ending the Cooperative Agreement between NTIA and Verisign would trigger renegotiation of the private .com Registry Agreement between Verisign and the Internet Corporation for Assigned Numbers and Names (“ICANN”), a nonprofit entity that ostensibly protects the public interest but counts Verisign as its largest financial backer. The Cooperative Agreement has ultimately harmed consumers, weakened public oversight, and provided cover for an exclusionary agreement between ICANN and Verisign that is ripe for both public and private antitrust scrutiny.

The renewal of the Cooperative Agreement only makes sense if the NTIA is able to restore the pre-2018 Cooperative Agreement. And one meaningful source of leverage for the NTIA to negotiate a reversion to pre-2018 conditions — including the restoration of a marginal price cap that reflects a fair market value — is its authority to trigger nonrenewal of the existing Cooperative Agreement. Our analysis suggests that price caps that allow Verisign to recoup a modest 10% margin would result in prices that are less than half of what Verisign currently charges, while fully compensating Verisign for any legitimate expenses associated with maintaining not only the .com TLD but also other databases and servers relating to internet infrastructure.

This brief details NTIA’s options for ending its relationship with Verisign, opening up management of the .com TLD for competitive bidding, and restoring fair price caps. It also addresses misconceptions about Verisign’s price justifications, which may have held back past administrations from solving, rather than perpetuating, this problem. Finally, looking beyond the NTIA, the brief presents a legal roadmap explaining how the Antitrust Division of the Department of Justice (or a class of web domain owners) could challenge Verisign and ICANN’s collusive anti-competitive grip on the .com wholesale market.