Tucows 2014 Annual Report Download - page 19

We rely on our network of resellers to renew their domain registrations through us and to distribute our services, and
if we are unable to maintain these relationships or establish new relationships, our revenues will decline.
The growth of our business depends on, among other things, our resellers’ renewal of their customers’ domain
registrations through us. Resellers may choose to renew their domains with other registrars or their registrants may
choose not to renew and pay for renewal of their domains. This may reduce our resellers’ number of domain name
registration customers which in turn would drive up their customer acquisition costs and harm our operating results. If
resellers decide, for any reason, not to renew their registrations through us, it may in turn reduce the market to which our
resellers could market our other higher-margin services, thereby further impacting our revenue and profitability and
harming our operating results.
We believe that companies operating on the Internet are facing a period of consolidation. In addition, some of our
resellers may decide to seek ICANN accreditation. Both of these situations could reduce the number of our active
resellers, in which case our revenues may suffer.
If any of our competitors merge with one another, they will present a stronger combined force in the market and
may attract the business of both existing and prospective resellers. Resellers may opt to build their own technical systems
and seek ICANN accreditation in order that they may process domain applications themselves. If a number of our
customers decide to pursue this option, our sales will decrease.
Our failure to secure agreements with country code registries or our subsequent failure to comply with the regulations
of the country code registries could cause customers to seek a registrar that offers these services.
The country code top-level domain, or ccTLD, registries require registrars to comply with specific regulations.
Many of these regulations vary from ccTLD to ccTLD. If we fail to comply with the regulations imposed by ccTLD
registries, these registries will likely prohibit us from registering or continuing to register domains in their ccTLD. Any
failure on our part to offer domain registrations in a significant number of ccTLDs or in a popular ccTLD would cause us
to lose a competitive advantage and could cause resellers to elect to take their business to a registrar that does offer these
services.
Our standard agreements may not be enforceable, which could subject us to liability.
We operate on a global basis and all of our resellers must execute our standard agreements that govern the terms
of the services we provide to our customers. These agreements contain provisions intended to limit our potential liability
arising from the provision of services to our resellers and their customers, including liability resulting from our failure to
register or maintain domains properly, from downtime or poor performance with respect to our Internet services, or for
insecure or fraudulent transactions pursuant to which we have issued SSL certificates. As most of our customers purchase
our services online, execution of our agreements by resellers occurs electronically or, in the case of our terms of use, is
deemed to occur because of a user’s continued use of the website following notice of those terms. We believe that our
reliance on these agreements is consistent with the practices in our industry, but if a domestic, foreign or international
court were to find that either one of these methods of execution is invalid or that key provisions of our services
agreements are unenforceable, we could be subject to liability that has a material adverse effect on our business or we
could be required to change our business practices in a way that increases our cost of doing business.
Regulation could reduce the value of Internet domain names or negatively impact the Internet domain acquisition
process, which could significantly impair the value attributable to our acquisitions of Internet domain names.
The acquisition of expiring domain names for parked page commercialization, the sale of names or acquisition
of names for other uses involves the registration of thousands of Internet domain names, both in the United States and
internationally. We have and intend to continue to acquire previously-owned Internet domain names that have expired
and have, following the period of permitted reclamation by their prior owners, been made available for sale. The
acquisition of Internet domain names generally is governed by federal or international regulatory bodies. The regulation
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