industry

This page profiles the domain name industry (DNI): registries, registrars, resellers, resolution service providers and others.

It covers -

• industry structure
• trends
• scale and scope
• DNI regulators in the public and private sectors
• registries
• registrars
• agents
• resellers
• arbitrators
• other services

     industry structure

As preceding pages have suggested, the domain name industry is small (global turnover is less than that for hair products or petfood in the US or the US$1.6 billion spent on political tv advertising in 2004) but a significant facet of the information economy.

It involves a range of players -

regulators - policymakers and administrators within national governments and in autonomous bodies such as ICANN and auDA that operate with government sanction

registries - the entities that operate the domain name registries for the gTLDs and ccTLDs, generally on a commercial basis

registrars - entities, again generally operating on a commercial basis, that are authorised to register names. While registrars in the dot-au space tend to register name on demand - ie in response to requests by registrants - some registrars in the dot-com, net and us spaces have registered several hundred thousand names in anticipation of demand, releasing those "pre-registered" names onto the secondary market through auctions or sales that involve a significant premium.

resellers - most registrars act as retailers and wholesalers of registration services, using agents (eg ISPs and law firms) to resell their registration services in addition to direct sales to consumers

resolution services - Alternative Dispute Resolution (ADR) agencies that provide a mechanism for dealing with disputes about domain registrations. Resolution mechanisms for the gTLDs are highlighted here and for dot-au are highlighted here.

other specialists - intellectual property lawyers, brand management consultants, regulatory specialists, IT journalists, public policy analysts, industry advocates and others

registrants - the businesses, institutions, affinity groups, individuals and other entities that acquire domain names

Most government and academic research has centred on domain administration rules and dispute resolution mechanisms. There is no major academic study about the shape of the industry as a whole. Volatility within some countries or sectors (eg the departure of resolution service providers and resellers) means that many business figures are suspect.

Overall employment by the industry is unknown, although as a 'knowledge industry' it may not be large - the major registrars for example employ only a few hundred staff and regulatory bodies such as ICANN and auDA have only a handful of personnel.

Maturing of the industry is likely to permit more accurate and comprehensive mapping through collation of figures published in reports by the regulators and individual businesses.

     trends 

Several trends are evident since the birth of the net -

a move from tacit knowledge to comprehensive publicly-available rules, procedures and policies. It has been accompanied by the rise of the 'cosmocrats' - the latest manifestation of the 'new class', a small cadre of technocrats who have a detailed understanding of technical and policy issues, speak the same language and often know each other through face to face contacts at global conferences and industry/national working group meetings

transition from volunteerism by individual technicians (sometimes characterised as "the spirit of the net") to administration and service provision by discrete regulatory bodies and commercial enterprises, often operating on a large scale

a move from monopoly service providers to competition in the provision of registry and registrar services, broadly associated with lower prices and improved services (along with the departure of many resellers)

the spawning of new gTLDs and cc2LDs, whether because "diversity is a good thing" or because it creates a market for some service providers

Many countries have followed the trajectory of the US and Australia. In the US the monopoly registrar VeriSign (a security services firm that acquired registry and registrar Network Solutions for between US$17 billion and 21 billion in March 2000, subsequently wrote down its assets by over US$16 billion in 2002-2 and spun off 85% of the registrar operations in 2003 for a mere US$100 million) was initially perceived as being in a position to print money.

Fred Vogelstein's 2001 B2.0 piece The Man Who Bought The Internet for example claimed that

Stratton Sclavos increasingly runs the Web. His company, Verisign, has erected cyberspace's largest toll booth and is now poised to extract a usage fee from just about everyone. Verisign is already the center of a monstrous amount of activity. Its servers deal with two billion domain-name searches a day, protect some $360 billion in annual Net commerce, and handle $500 million in credit card transactions a quarter. The electronic directions to every Website in the world with an address that ends in .com, .org, or .net - roughly 30 million in all - sit in Verisign's computers under government contract. The company gets $6 a year for each address stored in its database. It also owns the code for nearly every secure credit card transaction over a Netscape or Internet Explorer browser ...

ICANN introduced competition - effectively through installation of competing registrars, less effectively by creating additional gTLDs - and has since been under attack from the former monopolist.

Registration handling times and prices have however declined significantly and hyperbole about a "messy divorce" between the US government and VeriSign -

The custody fight for the "children", some 5.2 million registered domain names, will likely make the gunfight at the OK Corral look like children playing with pop guns ...

have not come to pass.

In Australia's dot-au space much registration responsibility passed from volunteer Robert Elz to Melbourne University spinoff MelbourneIT, which floated with delicious results for its stags but has since seen its share price slump - despite expansion overseas - in conjunction with auDA's introduction of competition and slowing uptake of registrations. Registry operator AusRegistry has been promoting the revamped 'id' 2LD but with apparently disappointing results. Resellers of dot-au registrations have been squeezed by indifferent consumer demand and lower margins.

     scale and scope

Registration is a low value but high margin activity where registries and registrars can generate respectable profits through high volumes, use of automation and an apparent preparedness to squeeze resellers (eg some are now required to provide substantial bonds).

An example is provided by dot-info and dot-org registration. Users typically pay around US$20 for names in those gTLDs. The dot-info space contains nearly a million names: registrar Afilias earns US$5.75 per year for each name. There are over 2.3 million names in the dot-org space: Afilias will collect US$6 per name, passing US$2 to ISOC's Public Interest Registry. In the second quarter of 2002 VeriSign handled around 550,000 new domain registrations and 660,000 renewals, for an aggregate 10.3 million active domain names ufor over 5 million unique customers.

US researcher Ben Edelman has noted substantial divergence among use of gTLD registrars. Major US corporations use one set of registrars and Yahoo-listed domains tend to use others. Edelman's Fortune 1000 Domain Registrations: An Alternative Perspective on Registrar Market Share paper suggests that Verisign has a larger market share of active domains than previously suggested.

He's followed up his research with two insightful 2003 studies: Survey of Domain Registration Services here and Alternative Perspectives on Registrar Market Share here.

One picture of the future is provided by New Zealand, where growth in registrations had slowed to an average of 1,485 registrations per month during April 2001 to March 2002 from an average of 2,705 registrations per month for the previous year, with around 113,000 registrations active in the dot-nz space and some 2LDs comprising a derisory 28 domains. That market is being chased by over 20 registrars.

     regulators

Regulation of the domain name industry involves two groups of bodies: government agencies (essentially concerned with trade practices) and nongovernment entities such as ICANN, auDA, InternetNZ and CIRA.

As noted earlier in this profile, there is no national or international government agency with direct responsibility for administration of the domain name system or the allocation of domain names. (There is a broader discussion of responsibilities in our Governance guide.)

Governments across the globe do not have specialist agencies specifically concerned with regulation of the domain name industry; instead responsibility is distributed among a range of agencies (typically bodies concerned with telecommunications regulation, competition policy and consumer affairs). There are few national laws specifically concerned with domain naming. Resourcing varies considerably, as does expertise. The extent to which many government agencies understand the industry (and the net as a whole) is unclear: the naivety of government participants in or responses to some industry working groups in Australia and overseas is of interest.

On a day to day basis most government regulatory involvement with the industry involves trade practices concerns, primarily at the retail level. There has been little attention to industry concentration, reflecting perceptions that consumers are well-served by the market (for example the New Zealand government comments about the former Domainz monopoly noted in our dot-nz profile) and the trend in most countries towards greater competition in the provision of domain name services.

Action by the Australian Competition & Consumer Commission, US Federal Trade Commission and UK Department of Trade & Industry has instead centred on misleading claims by vendors of alternative domain names or registration scams such as 'slamming'. That action has reflected tensions within the public sector regarding regulation of the net: state/provincial agencies appear to take a greater interest in consumer affairs aspects of the industry but defer to national trade practices bodies because cyberspace is borderless; national agencies have difficulty with activity across borders (eg in relation to gTLDs).

A picture of nongovernment regulation was provided on the preceding page of this profile. From an industry perspective two facets are striking.

The first is the small size of bodies such as ICANN, auDA, CIRA and InternetNZ. They have small secretariats (eg auDA has a grand total of three staff) and, given the scope of their responsibilities, low budgets. Bodies in other industries have often been driven by consultancies: relying on outside experts to offset a small staffing base.

Maturation of the industry as a whole has increasingly been reflected in use of consultants by the range of industry players but for the moment bodies such as ICANN and auDA rely heavily -

• on the expertise of their boards and volunteer advisory panels/working groups (this site's author has been a member of auDA working groups)
• extensive public consultation processes, sometimes inhibited by the lack of resources for public outreach
• transparency in corporate decisionmaking (with an emphasis on publication of comprehensive user-friendly guidelines or other policy statements, eg CIRA's Technical Specifications for Registrars-User Guide (PDF)

The second is the paucity of community input as part of consultation activity, with few public submissions of any substance in response to calls for input and much comment being self-reflexive or substituting vehemence and personal invective for cogent analysis.

That has reinforced reliance on personal networks and implicitly biases decisionmaking in favour of representations by DNS specialists (somewhat glibly characterised by one pundit as 'cosmocrats').

The bias is strengthened by ongoing commercialisation of the net (significant business interests are now affected; industry activity involves multimillion dollar revenue) and the consequent tendency to conduct negotiations on a commercial-in-confidence basis, ie the "behind closed doors" decried by some critics.

     registries

If domain name registries are the "telephone directories of the Internet", who is in the business of publishing those directories?

The earlier discussion of DNS administration flagged the diversity of domain registry operators, from giants responsible for the gTLDs to academic or other entities handling some of the smaller ccTLDs and national 2LDs.

Registry operation involves development/maintenance of databases in accord with IETF and ICANN protocols. Technically it's not 'rocket science' and problems relate to management (how data is loaded, processed and released) rather than databases per se.

Problems with registries have accordingly related to failures in security (eg breaches by hackers), inappropriate release of confidential data and questions about the validity of information or restrictions on access by registrars.

Globally the industry is characterised by a handful of large operators that provide services for the gTLDs and/or major ccTLDs on a wholly commercial basis; some operate registries for several ccTLDs.

Entry into the market requires technical expertise, marketing and lobbying skills and an investment in infrastructure and compliance fees (with regulators for example charging upwards of $100,000). Maintenance costs thereafter may not be high and revenue reflects the size of the domains (eg in major ccTLDs and gTLDs between several hundred thousand and twenty million registrations at $5 to $11 pa).

As yet share registry operators, addressing similar technical and regulatory challenges, haven't moved into the domain name registry market.

Some commercial and nonprofit entities integrate registry and registrar activity: particular ccTLDs such as dot-tv, dot-am and dot-md have effectively been outsourced to US businesses.

Globally there are under 150 registry operators.

     registrars

The retail sector is the part of the industry with which consumers - and many observers - are most familiar: for much of the world the "selling of domain names" (especially at million dollar prices) is the industry.

The shape of retailing varies from jurisdiction, reflecting the sophistication of consumers and restrictions with particulat ccTLDs (eg presence requirements and impediments to a secondary market). Broadly, the sector comprises -

• registrars
• agents
• resellers

As the name suggests, registrars are entities that register domain names (ie act as agents for registrants - domain name holders - in entering domain names into the pertinent registry).

They are the part of the market with the largest turnover and the emphasis on automated operation (eg consumers and resellers acquiring and paying for names online) means that their activity can be quite profitable. That is reflected in valuations of registrars such as VeriSign and MelbourneIT and in multimillion dollar takeover bids for operators such as Registrar.com (one of the five largest global registrars, with bids of around US$220m in January 2003).

As noted earlier in this profile, some registrars have exploited their access to capital, infrastructure and other advantages to actively participate in the secondary market - acquiring and selling names (often through online auctions). Some serve as registrars and registries.

ICANN's accredited registrars - ie those for the gTLDs - are listed here. Of around 168 registrars some 78 are based in the US, 7 in Canada, 1 in New Zealand, 5 in Australia, 4 in Spain, 10 in the UK, 4 in China, 8 in Germany, 5 in France, 11 in Korea, 5 in Japan and 3 in Israel. Overall the largest registrars have a slowly declining market share (eg in 2002 the top ten registrars were responsible for 80% of all dot-com domains, down to 76% in 2003). As of November 2003 the top 10 gTLD registrars appear to be NSI, Tucows, Godaddy, Register.com, eNom, Melbourne IT, BulkRegister, Schlund, DirectNic and Dotster.

The number of registrars for each ccTLD varies considerably: some have only one, others have more than twenty. The dot-au registrars are highlighted here.

Prices charged by most registrars are affected by registry wholesale prices. In some instances gTLD retail prices have been less than the registry price because discount domain names have been used by ISPs or other entities as a customer acquisition strategy.

Many registrars offer a range of prices, including a standard retail price for a single name, bulk discount prices for end users, discounts for agents and on occasion special offers to generate interest in new gTLDs or 2LDs.

     agents

Most registrars sell direct to consumers and use a network of agents - specialist domain name retailers, ISPs, law firms, accounting firms, and other bodies that serve as agents of the registrars in registering new domain names and renewing existing names.

Margins are often thin and many agents make their money by including registration within a package of services (eg trademark protection or website hosting).

They are not accredited by regulatory entities to act as registrars: regulators such as auDA exercise control over their activities on an arm's-length basis through regulation of the 'parent' registrar. On occasion that's meant that some agents have attracted attention from consumer protection bodies over misleading claims or what's perceived as exorbitant charges. Major registrars have consistently faced criticism over fee structures and onerous requirements for their agents.

     resellers

Rules in several of the gTLDs and some ccTLDs allow for a secondary market, ie easy resale of domain names by speculators or for other reasons. The resale sector comprises entities that retail previously registered (rather than new) domain names.

Some resellers operate on a large scale, with a portfolio of several thousand names that they have registered or that have been registered by a parent registry, or involve online auctions. Others, as noted earlier in this profile, only handle a few names. Perceptions of the secondary market differ: it is variously characterised as an indication of market maturity or based on undesirable speculation.

There are no generally accepted figures on the number of participants in the retail sector or its dimensions. Major registrars are often public companies whose disclosures provide statistics about transactions and revenue. However, the nature of their relationship with agents (often on a registration by registration basis) means that comprehensive figures on registrations through agents are not available.

The shape of the resale market is similarly unclear: major registrars have tacitly folded resale subsidiaries such as Afternic and the dollar value of sales by small-scale speculators ("this domain for sale") is impossible to map.

     arbitration

We have considered domain name dispute resolution mechanisms in discussing disputes, the auDRP, and UDRP, and ADR. There has been almost no literature on domain name disputes as a business sector; attention has instead focussed on the significance of cybersquatting, the legitimacy of protection for trademark owners and other entities or specific features of mechanisms such as the UDRP and ACPA.

The arbitration sector encompasses arbitration service providers and the lawyers that act for the parties in disputes over domain names. The value of turnover in the sector and the number of people (or entities) involved is unknown. It is clear that at the gTLD level most domain name arbitration is provided on a commercial basis by WIPO, the Geneva-based global intellectual property organization. Other gTLD arbitration is provided by the three other services accredited by ICANN.

Some indication of the economics is provided by the withdrawal from the market in late 2001 of eResolution. Arbitration regarding ccTLDs is provided by services accredited by the pertinent domain regulator; the Australian auDRP scheme for example is highlighted here.

Most action in Australia and overseas appears to have been handled by major corporate or specialist law firms: under 100 firms account for most cases. Action under trademark or other legislation such as the US AntiCybersquatting Protection Act similarly appears to have involved 'high end' law firms and many disputes - rightly or otherwise - appear to have terminated when the registrant received a stern letter from the 60th floor.

     services

A sense of the number of domain names registered - and smaller number in active use - is provided in the Metrics & Statistics guide.

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