New contract entitles Verisign to raise .net domain prices above $6 from January 1, 2007, thus eliminating the price cap.

The Internet Corporation for Assigned Names and Numbers, (ICANN), the nonprofit organization responsible for Internet addresses, agreed to lift wholesale price restrictions on .net registry fees last month when it renewed a contract with VeriSign to run the master database for .net domain names.

The new contract, which allows VeriSign to run .net for the next six years, caps the wholesale price of a .net domain at $4.25 per year, a 29% reduction on the former industry-standard $6-per-year pricing. But the contract also completely eliminates the cap come January 1, 2007, meaning VeriSign will be free to raise prices, potentially even above $6, if it wants to.

"Prices have always been set arbitrarily, and I think ICANN, as a technical coordination body, doesn't want to be involved in the price-setting business," said Galvin, VeriSign's spokesperson .

Galvin noted that the new contract requires VeriSign to give six months notice of any pricing changes, which would give customers time to 'lock in' their registrations at the lower prices by taking out multi-year registrations and also added that the contract gives the company the flexibility to raise prices to invest in its infrastructure.