Tucows 2015 Annual Report Download - page 23

Risks related to Domain Services
We may not be able to maintain or improve our competitive position and may be forced to reduce our prices because of
strong competition in the market for Internet services generally and domain name registration, in particular, which we
expect will continue to intensify.
The market for Internet services generally and domain registrations in particular is intensely competitive and
rapidly evolving as participants strive to protect their current market share and improve their competitive position, and we
expect competition to intensify in the future. Most of our existing competitors are also expanding the variety of services
that they offer. These competitors include, among others, domain name registrars, website design firms, website hosting
companies, Internet service providers, Internet portals and search engine companies, including Google, Microsoft,
Web.com, GoDaddy, VeriSign and Yahoo!. Competitors like Microsoft, Google and Yahoo!, as well as other large Internet
companies, have the ability to offer these services for free or at a reduced price as part of a bundle with other service
offerings. If these companies decide to devote greater resources to the development, promotion and sale of these new
products and services, greater numbers of individuals and businesses may choose to use these competitors as their starting
point for creating an online presence and as a general platform for running their online business operations. In particular,
VeriSign may in the future decide to offer additional services that compete with our domain name registration services or
other services. If VeriSign were to become a competitor of ours in our core business areas, VeriSign would likely enjoy a
number of competitive advantages, including its position as the largest registry, as well as superior financial and
operational resources and customer awareness within our industry.
In addition, these and other large competitors, in an attempt to gain market share, may offer aggressive price
discounts on the services they offer. These pricing pressures may require us to match these discounts in order to remain
competitive, which would reduce our margins, or cause us to lose customers who decide to purchase the discounted service
offerings of our competitors. As a result of these factors, in the future it may become increasingly difficult for us to
compete successfully
We also face significant competition from other existing registrars and the continued introduction of new
registrars in the domain registration industry. Currently ICANN has over 2,100 active registrars who register domain
names in one or more of the generic top level domains, or gTLDs, that it oversees. Not all of these accredited registrars,
however, are operational. There are relatively few barriers to entry in this market, so as this market continues to develop
we expect the number of competitors to increase. The continued entry into the domain registration industry and the rapid
growth of some competitive registrars and service providers who have already entered the industry may make it difficult
for us to maintain our current market share. As a result, we may not be able to compete effectively.
In addition, we cannot predict the impact ICANN’s New gTLD Program will have on the domain name industry. Our
competitive position depends in part on our ability to secure access to these new gTLDs. A significant portion of our
business relies on our ability to sell domain name registrations to our customers, and any limitations on our access to new
gTLDs could adversely impact our ability to sell domain name registrations to customers, and thus adversely impact our
business. In addition, the New gTLD Program could substantially change the domain name industry in unexpected ways
and is expected to result in an increase in the number of domains registered by our competitors. If we do not properly
manage our response to the change in business environment, and accurately predict the market’s preference for specific
gTLDs, it could adversely impact our competitive position or market share.
Each registry and the ICANN regulatory body impose a charge upon the registrar for the administration of each
domain registration. If these fees increase, this may have a significant impact upon our operating results.
Each registry typically imposes a fee in association with the registration of each domain. For example, Verisign,
the registry for .com, presently charges a $7.85 fee for each .com registration and ICANN currently charges a $0.18 fee for
each .com domain name registered in the generic top level domains, or gTLDs, that fall within its purview. We have no
control over these agencies and cannot predict when they may increase their respective fees. In terms of the current registry
agreement between ICANN and Verisign that was approved by the U.S. Department of Commerce in November 2012,
VeriSign will continue as the exclusive registry for the .com gTLD until November 2018. In addition, pricing of New
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