28 March 2001
Names Council resolution on the proposed revision to the ICANN/Verisign (NSI) agreement
This resolution was agreed at the Names Council telephone conference held 28 March 2001. There were separate votes on the four parts of the NC resolution. Parts B and C passing by majority and A and D by a 2/3 majority thus representing a consensus policy within the definitions of the NC by-laws and referenced in the 1999 ICANN NSI agreement.
"Consensus Policies are those adopted based on a consensus among Internet stakeholders represented in the ICANN process, as demonstrated by (1) the adoption of the policy by the ICANN Board of Directors, (2) a recommendation that the policy should be adopted by at least a two-thirds vote of the council of the ICANN Supporting Organization to which the matter is delegated.."
Whereas the Names Council stated at its 11 March 2001 meeting:
1."The new proposed Verisign-NSI/ICANN Agreement published last week represents a substantive policy change and involves a fundamental shift in the structure of competition. The proposed change comes as a surprise and is a source of significant concern to many stakeholders.
2. Such a change would require careful consideration by the DNSO constituencies and the Internet community. It cannot be considered except in accordance with due process allowing a reasonable time for the constituencies to consider and comment on the proposed changes.
3. The ICANN Board should not be precipitated into any decision until full consideration has been given to this issue in accordance with ICANN's procedures and DNSO consultation."
Whereas the ICANN Board has resolved:
[01.22] that the Board requests all members of the Internet community, including the Names Council and any of the constituencies and other participants in the Domain Name Supporting Organization, to provide comments on the substantive merits of the proposal no later than 31 March 2001;
Whereas the Names Council has requested its constituencies and the DNSO general assembly to communicate their positions on the proposed agreement,
A. The Names Council resolves to communicate to the ICANN Board the following statement.
1. That it remains concerned about the lack of earlier consultation.
2. That the NC seeks clarifications on the revised agreement.
3. That areas of concern (for the full comments, see the attachments) are:
a) the lack of certainty in the stability of the changed competitive climate which has been used to justify a decision to no longer require registry or registrar divestment;
b) if the registrar is not divested, the speed of the proposed divestment of dot org and dot net in the revised agreement and the uncertainty reflecting divestment of dot net;
c) the provision of WhoIs services;
d) structural safeguards to prevent potential misuse of dominant market power.
[the vote on part A was 15-1-0 representing a consensus]
B. The NC resolves that if forced to choose between the existing agreement or the revised agreement as written the NC reluctantly chooses the existing agreement.
[the vote on part B was 9-6-1 representing a majority]
C. The NC proposes that a win-win position for ICANN and the internet community would be for the Board to seek negotiation with Verisign on the following provisions and, if necessary, to ask the US Department of Commerce and Verisign to consider a delay while these changes to the revised agreement are sought:
1) earmark a specified portion of Verisigns promised $200 million R&D/investment fund to the development and implementation, in an open and transparent process, of the platform and search capabilities for a unified, publicly accessible WhoIs service that spans .com, .net and .org, and is both available and required for all ICANN accredited TLD registries;
2) earlier divestment of dot net;
3) enforceable safeguards, with an ultimate sanction of divestment of the dot com registry and registrar, regarding the potential for abuse of dominant position.
[the vote on part C was 10-1-5 representing a majority]
D. The NC also resolves to communicate to the ICANN Board the individual positions of its constituencies and discussion in the General Assembly (see below). (Constituency order follows the by-laws.)
[the vote on part D was 16-0-0 representing a consensus]
1. ccTLD registry constituency
The ccTLD group needs much more time that other Constituencies to consider ICANN issues, for two main reasons: first because a lot of people consider ICANN is not about ccTLD, second because the group is international by nature, and communicating very slowly. However taking into account an extremely short time, the ccTLD Council representatives decided to convey individual ccTLD members comments in absence of Constituency consensus. The summary of ccTLD members input is provided below.
Assumptions on ICANN - VeriSign agreement:
The ccTLD Constituency members have been taking into account the following "border conditions":
1. The current ICANN -VeriSign agreement (option "A") originated between the US Department of Commerce and Network Solutions Inc., and after several revisions has been adopted by the ICANN Board on 4 November 1999. This agreement follows a timeline, agreed upon by the DoC and the NSI, with several actions concerning .com, .org and . net registry/registrar activities. The next date is 10th May 2001 - under a 1999 agreement the VeriSign is obliged to divest the assets and operations of either the NSI Registrar or the Registry. VeriSign announced its intention to divest itself of the assets and operations of the NSI Registrar and to continue to operate the Registries for .com, .net, and .org through at least 2007.
2. This ICANN - VeriSign agreement as such is subject to the US law, and is between two private sector companies, which committed to accept it. All re-negotiations are possible, but subject to agreement of both parties. a. Since December 2000, the ICANN staff have been approached by VeriSign to revisit the current agreement. b. ICANN staff has been taking into account the fact that agreements for new gTLD, following selection in November 2000, differ from the one for . com, .org and .net. c. A revised contract, option "B, has been drafted and reviewed between ICANN staff and VeriSign, and published on 1st March 2001. d. ICANN staff presented a comparative study of advantages and drawbacks of both options, "A" and "B", in Melbourne, mid-March 2001. e. Both VeriSign and ICANN staff have been publicly stating that the proposed option "B" is not subject to negotiation prior to 10 May deadline.
3. Several international rules apply to private sector agreements, such as open competition and deregulation of monopolies. At this stage, various governmental agencies are concerned (such as the US Department of Commerce or the Directorate General 4 of European Commission).
Results of 5 days e-mail consultation within ccTLD Constituency
The ccTLD Constituency has been provided notes from its NC representatives and was requested to comment and to choose between option "A" and option "B". The outcome of five days formal e-mail consultation, over which an additional group of 15 ccTLD (besides 3 NC reps) provided input, is:
1. Four (4) members are in favour of "A", one explicitly supports "A" to have "B" renegotiated.
2. Five (5) members are in favour of "B".
3. Six (6) members commented on ballot, stating option "B" is less harmful than "A", but both keep VeriSign in the same monopoly position as usual. The ccTLD members request to warn ICANN Board that the community do not have enough time to comment. The ccTLD members are concerned by agreements signed between ICANN and VeriSign (or others), because it might influence, directly or indirectly, on ccTLD as well (for example ICANN budget impacts on ccTLDs).
4. Initially three (3) members stated they do not care, afterwards two of them echoed the warning message which ccTLD shall sent to the ICANN Board.
In addition the ccTLD reps to the NC have posted personal comments to the NC. These can be found by following this link and subsequent strings:
2. Commercial and business constituency
The Business Constituency (BC) believes:
Firstly: it is not certain that the nature of a stable competitive climate in the registrar business has changed sufficiently to affect the dominant position of Verisign.
Secondly: that the question as to the relationship of a monopoly supplier (a registry) and a co-owned retailer (a registrar) has not been sufficiently explored for existing and new TLDs. The possibility of problems in cross subsidies and discrimination is of concern to the BC because we do not believe that competition can develop and thrive if such conditions exist ( Note: the BC is not suggesting that that is the case at this time).
Thirdly: it is unclear in the proposed revised agreement what the $5m for dot org will provide and if it is outright cash, or a combination of pre-determined products, services, hardware and technical assistance. It is also not clear what the proposed $200m of R&D will fund, and whether it could result in an unintended dependency on VeriSign technology or a vulnerability for entrants into registry and/or registration services.
Fourthly: experience elsewhere suggests that vertically integrated providers who control a monopoly service may lead to a distortion of incentives regardless of the intent with which the company entered into the situation.
Fifthly: the revised agreement seems less specific on the provision of WhoIs services than the former agreement.
Sixthly: that a function of the competitive climate is the risk to businesses from registrars insolvency and the subsequent risk to registrants names which represent a key channel to market.
Therefore, the BC has potential competitive concerns with the new agreement and are neutral as to the advantages of the new agreement to business users.
On balance therefore if there is a bald choice between the two agreements the BC favours the old agreement.
However, a more productive way forward would be to ensure the WhoIs work effort is a baseline for any change, and that the Board should give serious consideration to the answers given to the issues noted above in their consideration of either option.
3. gTLD registries constituency
The gTLD Constituency is pleased to provide its input to the Council on the proposed agreement between VeriSign and ICANN.
We believe that the proposed agreement, called Plan B, should be concluded and that it provides significantly greater benefits to the Internet community when compared with the status quo, or Plan A. Among these are:
In contrast with these benefits to the Internet community, we have heard no persuasive reason to support Plan A or not support Plan B. As regards VeriSign's continued ownership of the NSI Registrar, ICANN management has disclosed that the market share held by the NSI Registrar has dropped dramatically since the 1999 agreements were executed; with the ongoing, very rapid growth of ccTLD registrations and the advent of several new gTLD's, there seems little reason to assume that this trend will change. ICANN management also reports that VeriSign's implementation of the Organizational Conflict of Interest (OCI) provisions of the 1999 agreement --which would be continued under the proposed agreement-- has been very successful and actually generated no complaints (until the proposed agreement was announced); there seems little reason to assume that this practice would change. In fact, under the Plan B, VeriSign would for the first time locate the NSI Registrar in! a separate subsidiary. And finally, ICANN management has disclosed that under Plan A, VeriSign would likely be both a major "re-seller" of registrations and re-enter the market as an ICANN-accredited registrar anyway.
In conclusion, we believe that Plan B would serve the interests of the Internet community and the ICANN community far better than would Plan A and we have found no persuasive reasons to oppose Plan B.
4. ISPs and connectivity providers constituency
The basis for our recommendations to the Names Council is that there are no other alternatives than agreeing without modification to either the proposed agreements (occasionally referred to as "Plan B") or the agreements between ICANN, Network Solutions, Inc., and the United States Department of Commerce that were approved on 4 November 1999 and were signed on 10 November 1999 (also referred to as "Plan A").
We explicitly acknowledge the extraordinary efforts by the negotiators of ICANN and Verisign required to formulate the new proposal. We further welcome the fact that ICANN staff and Verisign representatives have done everything possible to explain the Agreements and fill in the information gap which the DNSO alludes to in the Names Council resolution cited above. We are particularly grateful for the way that Louis Touton and Roger Cochetti made themselves available at short notice on 19 March for a conference call with the constituency.
In our discussions as a constituency we have concluded that the advantages that "Plan B" has over "Plan A" are not great enough to justify a recommendation that ICANN adopt the new, proposed agreements. Our reasoning is reflected in these key points:
1. The new agreements appear to over emphasize the importance of splitting off the .org registry. The .org domain is a low-revenue and problematic registry to operate. There is no obvious advantage to having .org managed by an independent and less experienced registry. It is in the interests of the ISPCP that .org remain stable - a new, less experienced registry may imperil this goal.
2. The proposed agreements offer USD 200m over 10 years to support R&D and infrastructure development. However, there is no explanation of how this money is to be spent and it is likely simply the minimum amount that VeriSign would spend anyway to run the registry over that period.
3. "Plan B" appears to support better coordination of whois databases by requiring VeriSign to make its database available to a centralized database. However, ICANN has not even decided on a centralized scheme yet, nor is it clear who the administrator of a centralized database would be. Furthermore, if such a scheme is instituted, VeriSign can hardly refuse to support it. Conclusion We find no compelling reason to abandon the existing Agreements between ICANN and VeriSign and adopt the new proposal.
5. Non-commercial domain name holders constituency
The Noncommercial Domain Name Holders Constituency (NCDNHC) has numerous concerns about the revised ICANN - Verisign registry contract posted 1 March 2001. The NCDNHC concerns arise for both substantive and procedural reasons. However, we note that the proposed contract has some merit, and we propose changes that would allow the NCDNHC to support the contract.
2. Even though the contract contains significant new policies in registrar competition and .org registration, the DNSO was not consulted. To approve an agreement arrived at in this manner would undermine if not destroy the DNSO's policy authority, which is based on bottom-up consultation.
3. The integration of registry and registrar functions in the dominant COM domain may be anti-competitive without other changes (see #4 and #6 below).
4. The pace of divestiture is too slow. The divestiture of registry operations of ORG (31 December 2002) and NET (1 January 2006) should occur more quickly
5. The possibility of restricting ORG to only non-profit registrants is inconsistent with long-standing policies and practices.
6. Some of the presumed benefits of the revised agreement could be achieved by rapid authorization of new top-level domains and new registries.
7. The separation of the .com, .net, and .org registries is a positive development. The NCDNHC supports divestiture of NET and ORG from the COM registry to promote registry competition.
8. Accelerate the divestiture of ORG and NET to 1 November 2002.
9. As a supplement to the contract revisions, we support the creation of new gTLDs devoted to unrestricted use and non-profit organizations by June 2002.
10. Ensure that the ORG domain remains open to miscellaneous use and that the renewal rights of existing holders of ORG domains are not affected in any way by the transfer of administration.
6. Registrars constituency
The Registrar Constituency is responding to the request by the ICANN Board for input regarding the proposed 2001 agreements between ICANN and VeriSign.
We were surprised and disappointed to learn on March 1st, that VeriSign and the ICANN staff had negotiated revisions to the 1999 Network Solutions contracts with ICANN and the Commerce Department that, if approved by the Board and the Commerce Department, would abolish VeriSigns obligations to sell either its registrar or registry business. We were deeply concerned about the very short notice provided to the various ICANN constituencies regarding such material changes and felt strongly that there was inadequate time to properly examine the changes and prepare a response.
When ICANN was in its embryonic development, little more than two years ago, the registrar community rallied around ICANN and helped it legitimize its position within the Internet community. Registrars actively participated in Congressional hearings and other events that helped ICANN achieve its goals. The 1999 agreement was a key component to introducing and developing competition in the registrar sector. The divestiture requirement in that agreement communicated to the registrars a collective understanding of the ICANN policy. This understanding formed the basis for a number of key business and policy decisions taken by the registrars and new registry entrants.
The Registrar Constituency believes that the 2001 agreements, as currently drafted, fail to provide any significant benefit to the Internet community. Furthermore it significantly improves the windfall to VeriSign, which has long reaped the benefits of a governmentgranted monopoly. We believe that if approved, the agreements will undermine the competition that has only begun to emerge in the registrar and registry industries. In effect, these proposed modifications will make a contract that was already bad for the industry, even worse.
Therefore, given a choice solely between the 1999 agreement and the 2001 proposed agreements, the Registrar Constituency respectfully urges the ICANN Board to reject the proposed 2001 agreements.
However, the Registrar Constituency recognizes that the ICANN staff is working diligently to achieve benefits for the ICANN constituencies and the Internet consumers. We, unfortunately, do not believe that the 2001 proposed modifications achieve adequate benefits for either group. Therefore if the Board in its wisdom finds an opportunity to improve these proposed 2001 agreements, the Registrar Constituency hereby proposes certain changes that could provide the minimum safeguards for the Internet community to allow the Constituency to support renegotiation of VeriSigns contract:
(1) Bid the .net registry through an open, competitive process under the original schedule of November 2003. NSI/VeriSign to be disqualified from participating in the bidding process in its own right or through 3rd parties;
(2) Redirect the proposed $200 million VeriSign R&D spending to a fund that would benefit the goals of ICANN and the Internet community;
(3) Remove the proposed volume discount in the .com registry agreement;
(4) Require a minimum120-day notice to all ICANN-accredited registrars before the VeriSign Registry provides any new/expanded/enhanced services.
ANTI-COMPETITIVE CONCERNS WITH THE 2001 MODIFICATIONS
The proposed 2001 contract modifications will undermine competition in two significant ways.
1. VeriSign, unlike competitor registrars, will continue to bear essentially zero wholesale cost. The registry fee is the principal cost of selling a registration. VeriSigns registry fee is simply a payment from one VeriSign division to another, which nets out on the corporate income statement and balance sheet. For other registrars this is a real cost. This position allows the VeriSign registrar to offer aggressive and sometimes free promotions to customers that its competitors cannot meet or sustain. Today, VeriSign remains the largest global registrar by far, and the continuation of this unfair advantage would help perpetuate its position. Over time, VeriSigns predatory tactics will be used to drive competition out of the registrar business, thereby undoing the initial progress made by ICANN to date in the industry.
2. The VeriSign registry has over the years as a government-granted monopoly amassed significant capital, technical and market experience. Since the new TLDs are important to registrars survival and growth, it is imperative that these new registries be given plenty of opportunity and scope to flourish and grow. These new agreements raise the bar for new registries in what will be an uphill battle. While VeriSign will be free to continue to subsidize its registrar business from the revenues it derives as a registry. In contrast, the other registrars that have backed new TLD registries will be in a start-up phase during which time they will need to contribute significant capital mostly borrowed or derived from their registrar activities. Therefore any impact on their Registrar business could seriously impact their Registry development.
The draft agreements further impede competition by providing a presumption of a perpetual term for the .com registry. This predictability will over the long term enable VeriSign to fund and develop new services that will increase the .com registrys competitive edge and increase the gap between it and the next registry by a very significant factor, while during this period the new registries will be
For all of the above reasons we do not believe that this has been a fair deal. The ostensible benefits to the Internet community, as announced to the press, are nonexistent or, at best minor. First, the fact that the .org registry will be returned to its original purpose of serving the non-profit community is not a win just a return to the original intent when the U.S. Government gave VeriSign the monopoly. Second, the $200 million in research and development spending is not required to be additional to VeriSigns current research and development expenses and would therefore already be achieved by VeriSigns current R&D budget over the period in question. Furthermore, any proprietary R&D consummated by VeriSign will simply produce new products and services from which VeriSign alone can profit, in competition with new TLDs. Third, the termination of the .org registry term in 2002 and the shortening of the .net registry term by 22 months (althoug! h, there is a presumption for the incumbent in the .net agreement) are minor when one considers that approximately 90 percent of the gTLD market is in the .com and .net domains.
Finally, we do not agree with the suggestion that the 2001 modification does not change the practical effect of the 1999 agreement. An arrangement under which VeriSign would have become a reseller would first have had to pass muster with ICANN and the Commerce Department as being consistent with the spirit of the 1999 requirement. If such an arrangement had received approval, VeriSign would have become a re-seller for an existing registrar as thousands of other resellers have. But unlike other resellers VeriSign would be prevented from owning a substantial share of that Registrar which is why the Registrar community was in favor of that proposal.
While we do not doubt ICANNs good intentions and efforts to achieve benefits for the Internet community out of these negotiations, much more needs to be done in order to satisfy the Registrar constituency that there is a benefit to ICANN and its constituencies...
Registrars have been patient with the unfair advantages afforded the VeriSign registrar by its relationship with the registry because we believed that this unequal advantage treatment would end in May 2001.
The registrars strongly urge the Board to reject the current contract amendments fundamentally because it is premature and inequitable to alter the contracts upon which other registrars have built their business plans. Instead, it should move forward with allowing competition at the registry level with the introduction of new top-level domains (TLDs) and test how market forces drive the competitive bid of the .com, .net and .org registries in 2007.
7. Intellectual property constituency
IPC members have reviewed the proposal for new registry agreements regarding .com, .net and .org, with particular focus on the potential impact on prevention and resolution of intellectual property-related disputes. The main concern that has emerged from this review is the impact of the new agreements on unrestricted public access to registrant contact data (Whois).
Section 9 of the existing ICANN-NSI Registry Agreement contains specific undertakings on the provision of registry-level Whois. Section 9(C) also requires Verisign to cooperate in the development of a Whois service covering all three gTLDs, including contributing data to a centralized service if ICANN determines that is required. By contrast, the proposed revised .com registry agreement (Section 11) and the proposed revised .net and .org agreements (Section 3.10) are much less specific, and omit any explicit requirement to participate in a Whois service spanning .com/net/org. They do, however, obligate the registry operators to make data available in bulk for a similar service covering "multiple TLDs." The Appendices (O and P) which spell out the registries obligations in detail have not been made public to date.
While unrestricted public access to current and complete registrant contact data is universally recognized as a key tool in preventing and resolving intellectual property disputes as well as bolstering public confidence in the online environment generally, the status of Whois accessibility in the gTLDs currently is extremely disappointing. As ICANN staff have observed, most registrars are not in compliance with their Whois obligations under the Registrar Accreditation Agreement, and there has been very little discernible progress toward gTLD-wide Whois provision on a distributed basis. Accordingly, it would be timely for ICANN to give immediate consideration to invoking the terms of section 9(C) and requiring the gTLD registry to contribute data for a centralized cross-registry Whois service.
IPC recognizes that the proposed revised registry agreements, if adopted, could provide authorization for similar steps to be taken. However, because the provisions of the proposed new agreements are general and refer to Appendices that have not yet been made public, IPC recommends that the ICANN Board obtain appropriate specific assurances from Verisign regarding cross-registry Whois services before approving the revised agreements. Such assurances should include, but not necessarily be limited to, the following:
(1) Verisigns commitment, as of the effective date of the new agreements or a specified date within six months thereafter, to cooperate and contribute nameserver and registrant contact data on registrations throughout .com, .net, and .org, for the purpose of maintaining either a distributed or a centralized Whois service covering all three TLDs, as contemplated by section 9(C) of the current registry agreement;
(2) Earmarking of a specified portion of Verisigns promised $200 million R&D/investment fund to the development and implementation, in an open and transparent process, of the platform and search capabilities for a unified, publicly accessible Whois service that spans .com, .net and .org, and, to the extent possible, all other TLD registries.
The IPC also welcomes the opportunity of co-operating with ICANN on a transparent review of the services provided by the Verisign registry to owners of .com, .org and .net names with the aim of contributing to the better running of the registry.
8. General Assembly
The following statement was generated in the GA and approved by a vote in which 27 individuals participated.
After thorough discussion, the GA has shown rough consensus in favour to option A, i.e. to keep the current contract.
A straw poll conducted between the 15 and 20 March has given the following results:
24 in favour of the current contract (option A)
2 in favour of the new contract (option B)
1 neither of the above .
The reasons for the choice, as expressed by some participants, are mainly.
1) "horizontal" separation between Registrar and Registry, foreseen in option A, is perceived as a better deal than "vertical" separation among TLDs, and a better safeguard against a monopolistic position.
2) The switchover to option B is perceived as a change in policy, done without previous consultation of the DNSO (whose mission is to provide recommendations on policy), and moreover within very strict deadlines, absolutely inappropriate to evaluate in depth the implications of such change. For instance, some of the details of the new proposal, like some attachments, are still unknown at time of writing. Also, this change in policy is considered irreversible.
3) The financial advantages for the Internet community of option B are not balancing off the drawbacks above, as it is understood that the investment will be done by VeriSign at its discretion, based on a commercial logic that is perfectly legitimate but out of the control of the Internet community. The benefits for the Internet community are therefore not identifiable at this point in time, and it may be even assumed that other competing operators might invest comparable amounts of money in the infrastructure as well, if granted similar contracts by ICANN.
4) The other claimed advantage of option B, i.e. a different management of .org, is minimal in value if of any value at all, because years of practice of sale of names without enforcement of the original charter have irreversibly altered the content of .org Moreover, should a charter be enforced by ICANN and/or agreed with the .org registry (and this regardless on whether the registry changes owner, i.e. independently from option A or B being chosen), the GA is opposed to any action to cancel existing registrations. Any action of this type would be contrary to the legitimate interest of bona-fide owners of .org names.
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