Captive Renewals
TLDR
- DNS requires a per-registry monopoly to function.
- Registrants suffer from monopoly forces when renewing domains.
- Domains that are in use have inelastic pricing.
- Registrants must waive protections that mitigate anticompetitive renewal pricing to register registry premium domains.
Overview
Registrants are forced to participate in a captive market when renewing domains, so it is important to understand the monopoly-like power held by the registries because, without proper mitigating controls, registrants are left vulnerable should registries choose to engage in anticompetitive practices.
This topic is especially important to understand when registering premium domains as they lack price protections and may be vulnerable to individualized price discrimination.
Enforced Monopolies
DNS requires a collision-free namespace to function. To facilitate this, ICANN enforces a per-registry monopoly for all TLDs. There is a one-to-one relationship between TLDs and registries. Each TLD has one authoritative registry. There is no such thing as a non-authoritative registry.
This means that domain registrations and, more importantly, domain renewals can only be purchased from the authoritative registry for the domain’s TLD. For example, a .com
domain can only be registered and renewed via Verisign (archived), the authoritative registry of .com.
Registrants can choose between competing registrars, but, ultimately, the registrar must purchase the domain from the TLD’s authoritative registry.
Renewal Monopolies
Since every TLD has a single authoritative registry, all domain renewals must be purchased from the authoritative registry for the domain. Registrants cannot choose a competing registry, because there are not any. For all intents and purposes, registrants that need to renew their domains are participating in a captive market.
Inelastic Pricing
As domain registrants invest in their domain name by developing products and services that require a website, email, etc., the price elasticity for the domain’s renewal decreases. There are two key factors that cause this.
First, the domain often becomes a critical part of a much larger, high-value brand. What would the market bear if the .com
registry were allowed to engage in individualized price discrimination for a domain worth millions of dollars?
Second, it can be difficult to quantify the amount of damage done by dropping a domain if it has been used for business email, a business website, etc. Letting a domain expire might expose customers to bad actors that register the dropped domain for malicious purposes.
It is important to understand the role of bad actors because registering and using a domain can often mean registrants may feel obligated to renew a domain regardless of price. Failure to do so could result in reputation damage.
Registry Premium Domains
Registry premium domains suffer from all the negatives of captive renewal pricing with few, if any, of the benefits standard domains are granted to achieve a healthy market. Registrants considering a registry premium domain need to be aware they are waiving the minimal price protections enjoyed by standard
domains. This makes them vulnerable to individualized price discrimination for renewals. As dependence on, and the value of, the domain increase, so does the incentive for the registry to increase renewal prices.