VeriSign has decided to raise wholesale prices on .com and .net domains beginning in October. Saying that the price increases will be used for infrastructure improvements, the company announced that the wholesale price for a .com domain will rise to $6.42 from $6.00, while .net will jump to $3.85 from $3.50. 

In December of last year, ICANN and VeriSign inked an agreement allowing the company to keep control of the .com top-level domain through 2012. (VeriSign first gained control of .com in 1999 after it was awarded a no-bid contract). The agreement provides some control over price hikes, as it limits them to a maximum of seven percent in four out of the contract's six years. VeriSign must provide notice of the rate hikes at least six months prior to their going into effect.

There may still be additional rate increases, however. VeriSign's contract with ICANN also allows for increases due to ICANN policy shifts or for security reasons during the two years when the regular price hikes are not allowed.

ICANN's agreement with VeriSign was the subject of criticism from some areas. Network Solutions called it a "perpetual de facto monopoly," saying that it failed to provide sufficient checks and balances. Network Solutions also said the agreement was "fundamentally flawed" from a cybersecurity point of view.

As mentioned above, VeriSign is using the security angle to justify the increase. Revenues from the rate hike will go towards Project Titan, which is its initiative to expand the global capacity of its infrastructure ten-fold by 2010. DNS query capacity will increase to 4 trillion queries per day. VeriSign claims that it has seen security exploits grow by over 700 percent since 2000 and it projects those to increase by 50 percent in 2007 and 2008, which it believes justifies the infrastructure investment and price increase.

The degree to which the price hikes will be passed on to domain owners remains to be seen. Registrars are free to set their own prices once they have paid VeriSign, but it's hard to envision many of them choosing to swallow the seven percent increase themselves. So prepare yourself for a larger bill from your registrar when your domain is about to expire.