The Commerce Department renewed a contract permitting Reston-based VeriSign to operate a database of Internet domain names that end in “.com,” save for one key provision: The company can no longer increase its own annual fee.
The news depressed VeriSign’s stock price last week as Wall Street comes to grips with the idea that the company’s future revenue will likely grow at a slower pace than in past years.
VeriSign manages a database of roughly 105 million domain names with .com suffixes, such as www.washingtonpost.com. The companies that sell those Web addresses then pay VeriSign $7.85 a year for each domain name.
Under its prior contract, the firm was able to increase the fee four times over six years, imposing a 7-percent hike each time. The company must now get the Commerce Department’s approval to raise prices.
“So they lost that pricing latitude. It definitely matters,” said Steve Ashley, a director at Baird Equity Research. “[There will be] less revenue over the next six years. That’s totally the impact.”
In a Nov. 30 conference call, VeriSign chief executive James Bidzos downplayed the significance of the restriction, saying the company’s move into registry services and its portfolio of patents present revenue opportunities.
Bidzos added that VeriSign still stands on solid financial footing with $1.4 billion in cash and investments, and plans to buy back stock.
“This approval is an endorsement of our record on security and stability and our offerings of .com registry services on reasonable prices, terms and conditions,” Bidzos said.
The company also operates domain names ending in “.net” and it retained the right to increase that annual fee, which stands at $5.11, by 10 percent each year, Bidzos said.
The District-based Internet Commerce Association, which represents the interests of multiple-domain holders, advocated for the price freeze in a lengthy letter sent to the Commerce and Justice departments.
Philip S. Corwin, the group’s counsel, said the ICA also asked the departments to reduce the annual fee by at least $2, arguing the price would be lower if competitive contract proposals were solicited from other companies. That suggestion was not included in the final agreement.