(I wrote most of the below for an article on DomainSignals.com but it turned out to be too long for their needs, so rather than waste it I’m posting it here. I have also authored a white paper with detailed statistics that digs deeper into the price rise.)
BACKGROUND: On March 1, 2016, Nominet raised the wholesale price of UK domains from £3.50+VAT to £3.75+VAT a year. They also eliminated the 2-year price break that used to give discounted registrations of £5+VAT/2 years. Note that this is the wholesale price for direct registrations through Nominet – most registrants will buy their domains through a third-party registrar who will add their own (often significant) mark-up.
Nominet announced the price rise primarily as a 25p increase on the 1-year price. In the original announcement, there was no mention of the removal of the 2-year price break, and even when that became clear the consequences of this change were never made clear to the media.
Because the fact is that virtually nobody pays the 1-year wholesale price. If you qualify for wholesale pricing as a registrant, that’s because you’re registering direct with Nominet and fully aware of the 2-year price break (which is also the same period that Nominet’s shopping cart defaults to for registrations and renewals!)
If you’re an end user registrant, then you will have registered your domain name through a registrar that sells to third parties, and the price you pay is already significantly higher than the wholesale price. Again, most such registrants will have been registering and renewing 2 years at a time (indeed 3 out of the 4 largest registrars in the market default to a 2-year registration in their systems.)
So the actual cost of the supposed 25p price rise will actually be 50% for wholesale registrants, and between 33% and 87% (depending on the registrar) for retail registrants.
In other words, Nominet was complicit in a PR exercise sleight of hand. By focusing on a tiny price increase that nobody experiences while keeping quiet about the huge leap in price that will hit registrants in practice, it has been able to keep the negative press to a minimum. Journalists simply don’t have the time or the sector knowledge to dig into the background of this sort of thing and find out the truth.
The net effect of the price rise is to cost businesses over £20 million extra a year for zero additional benefit. After all, the domains being renewed on 1 March are no different from those being renewed prior to that date – they’re just more expensive!
At the same time, Nominet has traditionally operated its registry services on a cost-recovery basis, and has made a surplus of several millions of pounds a year, which it has funnelled to the Nominet Trust.
So there is no justification for the price rise on the basis of Nominet’s “need”. Put simply, Nominet doesn’t need the money to continue to fulfil its primary role as steward and guardian of the UK namespace.
But the company has lost its way in recent years, getting involved in more and more tangential businesses that have little or nothing to do with domain names. And that takes money. It’s also worth noting that average salaries at Nominet have risen from £28,542 to £60,276 since 2002 (an average of over 7% a year increase) while director remuneration has quadrupled over the same period, with the highest paid director now receiving over £300,000! So it’s clear that the extra income will easily find a home…
The companies that stand to profit most handsomely from the price rise (the retail registrars, some of which will make over £6,000,000 a year extra from their own price hike (which outstrips the wholesale price change, and increases their profit margins) are the same companies that exercise absolute control over Nominet’s voting system. Indeed, the 17 largest registrars (out of thousands) can combine to vote a majority on any decision Nominet makes. So it is little wonder that this state of affairs has been allowed to occur, even though it’s obvious within minutes to anyone observing at a greater remove that the price rise is unjust(ifiable).
Ironically, at the same time, these large registrars that control a majority of votes have used the wholesale price rise as a “shield” in their own communications to customers, pinning the blame for their own price increases squarely on Nominet’s shoulders, as if they were somehow out of the loop.
Nominet’s response to criticism has been to attempt to “explain” the price rise, rather than engage in any meaningful way in a wider discussion on whether it should even have been enacted or not. As the criticism has grown louder, so Nominet’s “explaining” has grown more vigorous, with private meetings between Nominet executives and key stakeholders, email communiques, a Registrar day with webcast, and other channels of communication.
But it’s all been a one-way flow. There is no evidence whatsoever, at any level of the Nominet organisation, that the consequential impact of the price rise has sunk in. They maintain that it is necessary, despite the huge surplus in their day-to-day operations, and despite the fact that it will represent a leap of 50% to 87% in the price their customers pay.
(NOTE: since this is an emotive topic, comments have been turned off on this post)