Enom 2011 Annual Report Download - page 25

to evolve both its long term structure and mission to address perceived shortcomings such as a lack of accountability to the public and a failure to maintain a
diverse representation of interests on its board of directors. We continue to face the risks that:
• the U.S. or any other government may reassess its decision to introduce competition into, or ICANN’s role in overseeing, the domain name
registration market;
• the Internet community or the U.S. Department of Commerce or U.S. Congress may refuse to recognize ICANN’s authority or support its policies,
which could create instability in the domain name registration system;
• some of ICANN’s policies and practices, and the policies and practices adopted by registries and registrars, could be found to conflict with the laws
of one or more jurisdictions;
• the terms of the Registrar Accreditation Agreement, under which we are accredited as a registrar, could change in ways that are disadvantageous to
us or under certain circumstances could be terminated by ICANN preventing us from operating our Registrar;
• ICANN and, under their registry agreements, VeriSign and other registries may impose increased fees received for each ICANN accredited
registrar and/or domain name registration managed by those registries;
• international regulatory or governing bodies, such as the International Telecommunications Union or the European Union, may gain increased
influence over the management and regulation of the domain name registration system, leading to increased regulation in areas such as taxation and
privacy;
• ICANN or any registries may implement policy changes that would impact our ability to run our current business practices throughout the various
stages of the lifecycle of a domain name; and
• foreign constituents may succeed in their efforts to have domain name registration removed from a U.S. based entity and placed in the hands of an
international cooperative.
If any of these events occur, they could create instability in the domain name registration system. These events could also disrupt or suspend
portions of our domain name registration solution, which would result in reduced revenue.
The relevant domain name registry and the ICANN regulatory body impose a charge upon each registrar for the administration of each domain name
registration. If these fees increase, it would have a significant impact upon our operating results.
Each registry typically imposes a fee in association with the registration of each domain name. For example, VeriSign, the registry for .com,
presently charges a $7.85 fee for each .com registration after a recently enacted 7% fee increase. ICANN charges a $0.18 fee for each 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 registry agreement between ICANN and VeriSign that was approved by the U.S. Department of Commerce on
November 30, 2006, VeriSign will continue as the exclusive registry for the .com gTLD through at least November 30, 2012. The recently announced 7% fee
increase is the final fee increase authorized under the current registry agreement for the .com TLD. The increase in these fees either must be included in the
prices we charge to our service providers, imposed as a surcharge or absorbed by us. If we absorb such cost increases or if surcharges act as a deterrent to
registration, we may find that our profits are adversely impacted by these third-party fees.
We intend to participate in ICANN's New gTLD Program, which may present us with unique operational and other risks. If we are unsuccessful in
managing these risks, our business, financial condition and results of operations could be adversely affected.
We intend to pursue certain opportunities in connection with ICANN's New gTLD Program, which may include operating the back-end
infrastructure for new gTLD registries and/or owning and operating one or more of our own gTLDs. We currently have no operating experience providing
back-end registry services to existing registries or acting as an owner and operator of domain name registries for gTLD strings. Our participation in the New
gTLD Program may involve us in new and complex processes with respect to the application and awarding of gTLD strings by ICANN, as well as require us
to rely upon, negotiate and collaborate with independent third parties. In addition, we expect to compete with other established and more experienced
operators in these proposed service offerings. If we are unsuccessful in managing these risks, our business, financial condition and results of operations could
be adversely affected.
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