Kim, you've omitted the issue of return on investment that a registry might
have made.  If the investment was $1000 to set up and the running costs
$1000 per year, then a 20% "markup" is high.  If the entry cost was $5M, and
the running cost $2M per year, then a 500% is too low.

Much of the value in a business lies in the resale value of the business
itself.  In the registry's case, if they lose the next tender their entire
investment to set up is lost - the business itself probably won't be sold to
the next successful bidder.  On the other hand if they ARE successful,
domain name prices should arguably drop dramatically because the registry no
longer has an initial investment to recover, just running costs to meet.

Takeup of domain names is less to do with price than whether it's a
worthwhile investment.  If there's a compelling business need for a domain
name, the $270 being charged by our WA friends is cheap.  If the market has
no need at all for a domain name, then $5 is too expensive.

Just my 'penneth worth ...

Ron Stark



> -----Original Message-----
> From: Kim Davies [mailto:kim§cynosure.com.au] 
> Sent: Monday, 17 May 2004 4:33 PM
> To: dns§dotau.org
> Subject: Re: [DNS] Rationale of .au high price was: [DNS] Cat 
> got your tongue Chris?
> 
> Quoting Anand Kumria on Monday May 17, 2004:
> | 
> | So, fundamentally, why is it that .au domains are so 
> expensive? I mean 
> | AusRegistry applies a 260% average mark-up before 
> on-selling them. I'm 
> | not sure what other kinds of businesses you've been 
> involved with but 
> | most people are lucky to get away with 30%.
> 
> I can't agree with this line of logic. It is not a 260% 
> markup. You can't compare it to a "resale", where a 
> wholesaler gives someone a product, they add their bit, and resell it.
> 
> AusRegistry operates the domain systems it does under 
> contract from auDA, and as part of that it must pay auDA a 
> sum. auDA is not creating a saleable product in itself, but 
> runs policy.
> 
> It is more akin to television stations buying broadcast 
> licences from the government. You can't argue that the 
> television stations are just adding "their markup" to the 
> government's product. I know it is a far from ideal 
> comparison but it is more true than what you are saying.
> 
> | In competitive environments generally 15-20% is common. 
> Anyway back to 
> | the question I posed earlier (why is .au so expensive). I 
> believe this 
> | is the result of auDA believing that domain names are price 
> inelastic 
> | (i.e. they are necessary for every Australian entity, so 
> they'll pay 
> | whatever price).
> 
> I don't think auDA believes such a thing.
> 
> A tender was held to operate 5 TLDs for 4 years. AusRegistry 
> won with its bid to run all five. Price was a factor but so 
> was technical competence and many other factors.
> 
> I would hope now that the market has matured somewhat, we 
> will have more competitive bids for the next four years when 
> it is retendered. I would hope the market dynamics will 
> result in whomever wins providing the service for a lower 
> price. Bear in mind that part of the cost of introducing the 
> new regime in 2002 was laying down the new industry 
> framework. That is a once-off cost which has now been borne.
> 
> | However a lot of organisations are realising just how 
> expensive .au is 
> | and are making use of other gTLDs (e.g. cityrail.info, 
> | sydneyhomeshow.com, etc.) instead. With those kinds of URLs getting 
> | widespread coverage and being heavily promoted I believe 
> you'll find 
> | fewer and fewer people who need to be told '.com but not au'.
> 
> I would really like to know if those organisations really think that.
> It's easy to say the reason is purely price, simply because 
> there are for .com's than .au's, and .com's cost less than 
> .au. But that is not a scientific connection, and my gut 
> feeling is it is not true.
> Do you really think CityRail is moaning over an approximately 
> $20/yr differential in cost?
> 
> I work primarily with European ccTLDs and it is the same 
> story everywhere, even in countries where the retail cost is 
> <$5 per year.
> There is basically one anomoly with Germany (~8 million 
> domains), but that has less to do with price, than the fact 
> the ISP industry that basically gives a domains as part of 
> their products to almost everyone whether they want it or 
> not. (I have 2 .de domains I never use just because I have 
> some services with an ISP and they came with it). Even then, 
> outside the US, Germany has the highest takeup of gTLDs 
> anyway - which blows your theory out of the water.
> 
> There is also a certain media-generated mindset with .com 
> that is nothing to do with price, just history. Key global 
> companies that are in the public's eye use .com domains - not 
> because they shun .au, but just a result of their global 
> nature. This is added to the fact that companies like Telstra 
> and ANZ were using .com's in the last 90's as their public 
> addresses. Again, I would say it had little do with price (In 
> fact, both companies had the .com.au equivelents), yet the 
> neon signs they were putting on the sides of buildings were 
> the .com addresses. This, I think, helps shape a certain 
> subconcious public perception regarding .com's.
> 
> | Anyway, I'm down to three domains stuck in .au and since 
> I've got them 
> | for another 2 years, I'll be able to transition them away 
> fairly slowly.
> | However if I was involved with the .au domain industry I'd 
> seriously 
> | be asking why auDA/AusRegistry/whoever are trading 
> short-term profit 
> | for long-term viability.
> 
> I would argue that auDA has clearly taken long-term viability 
> over short-term profit. A short-term profit motive would see 
> policy thown away and a free-for-all situation for domains, 
> plus devolution of the tiered structure allowing 
> registrations in the second level. Then you'd end up with an 
> exhausted domain supply, with auDA and AusRegistry and the 
> registrars running all the way to the bank. You'll then have 
> the .com situation where all practical domain names are long gone.
> 
> Whilst I am as keen as anyone to see prices drop, I don't 
> agree that .au is a failure due to pricing.
> 
> kim
> 
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