Responses by .biz/info/org Registry Operators are Unacceptable

[George Kirikos <gkirikos@xxxxxxxxx>]

Hello,

ICANN has posted the responses of the .biz, .info and .org registries
regarding the proposed new contracts at:

http://www.icann.org/announcements/announcement-1-12oct06.htm

They are unacceptable, and the proposed contracts should continue to be
rejected.

1) Tiered/Differential pricing -- Each of the registries proposes that
new language be added to the contracts that would continue to leave in
a big loophole to implement differential pricing. In particular, they
would allow it:

"to the extent a variable pricing model for active Registered Names has
been implemented in any other new or existing gTLD"

(effectively the equivalent language in all 3 proposed revisions)

This is an enormous loophole. Indeed, it's a loophole that may
*ALREADY* have been triggered, or be able to be triggered due to
existing contracts for newer gTLDs that don't have any theoretical
restrictions on pricing (e.g. it might be allowed in .asia or .mobi,
where more pricing policy discretion was given to the registry
operators). All it would take is *1* new gTLD to introduce differential
pricing, and these three registries would be permitted to do the same.
And of course by logical progression, VeriSign would want the same for
.com/net.  

The big difference is that registrants in any new gTLD that permitted
diffferential pricing knew this ex ante. Here, in the legacy
.biz/info/org agreements, the registry operators want to change the
rules for registrants ex post.

It's funny, because when this was first brought up, some registries
were suggesting that differential pricing was something that they
didn't even think was permitted in their first drafted contracts:

http://gnso.icann.org/mailing-lists/archives/ga/msg04293.html

"AGAIN, I AM NOT SURE WHERE YOU GET THE PERCEPTION THAT WE ARE ABLE
TO CHARGE DIFFERENT PRICES FOR DIFFERENT DOMAIN NAMES."

And argued that they couldn't get away with raising prices:

http://gnso.icann.org/mailing-lists/archives/ga/msg04292.html

"Although you insinuate that we could raise prices, do you honestly
believe that we could really get away with raising prices and not
suffer a huge loss in the demand for our services?  We operate in a
real economic market and not in a theoretical hypothetical world.  In
other
words, do you really think .BIZ could get away with raising prices
above that for a .com domain name and survive?  We do not.  We believe
that if we were to raise prices without a corresponding increase in
.com prices, registrants would switch from .BIZ to .com or .net in a
heartbeat."

In other words, the registries "played dumb". In their new comments,
they continue to "play dumb". However, I believe they are much smarter
than that.

What matters is not this rhetoric of the registries about "Oh, we'd
never be able to raise prices", or that "we'd never do differential
pricing". What matters is what's in the actual contracts. The contracts
propose removing price caps. Registries do not need price caps to be
removed if they plan to REDUCE prices --- they only need price caps to
be removed in order to RAISE prices. And though they say they don't
want differential pricing, their proposed contracts say if *ANY* other
gTLD registry somehow gets it, then we want it too! Sheesh. How stupid
do these registry operators think that ICANN and the public are?

Given the poorly scrutinized contracts for .mobi, .cat, .tel, .asia,
.eu, etc., where differential pricing might be introduced one day, even
on a limited basis, that springs the trap on .biz/info/org holders
under the proposed new contract language. 

It's clear even stronger language is needed than that proposed by these
registry operators, that gives greater certainty to helpless
registrants. If indeed these registry operators believe that they can
never price higher than .com, perhaps one simple solution is to put in
the identical caps as exist on .com. With identical caps to .com,
nothing would prevent the registry operators from lowering the prices
to registrants below those caps, if that is their noble intention. If
instead it's their evil intention to raise prices, they would be
thwarted.

2) PDP-FEB06 - None of the registries wants to wait until PDP-Feb06. Of
course, that's unacceptable. The renegotiation of their contracts was
far in advance of their expiration, and attempted to preclude
competitive tenders by other prospective registry operators. Registries
are simply contractors. They're in no position to dictate timelines to
ICANN and to the public it represents that only benefit themselves.
Limiting the debate and further scrutiny of their contracts to find
other flaws is not in the public interest.

The last group that gave ICANN an ultimatum to make a decision on a
proposed contract on a specific date was ICM Registry, for .xxx. These
registry operators should suffer the same fate, if a decision on
October 18th is demanded --- the Board should simply reject the
proposed contracts, period. The registry operators can then serve out
the remainder of their contracts, and then be subject to the renewal
terms contained therein, including the provisions from competing bids
by other prospective registry operators for .biz/info/org. Indeed, it
is in the public's interest that ICANN determine whether other
prospective registry operators might serve registrants of .biz/info/org
more cost effectively and/or with better service. Without a public
tender or "expression of interest" or similar process, ICANN is flying
blindly and by the seat of its pants, without any information. To make
informed decisions, one needs information, and these incumbent
registries are proposing to deny ICANN the opportunity to gather that
information. It would seem to me that the incumbent registry operators
are scared that competitors might emerge from that process, competitors
who would replace them, and thus they are trying to lock-in ICANN to
long-term (indeed perpetual) bad deals for consumers.

3) Presumptive Renewal: As discussed above, presumptive renewal should
not be a part of any new contracts. It's no surprise that all of the
registry operators wanted it. They say they "need" it, in order to
invest in their businesses.

Yet, somehow they were able to submit applications to run .biz/info/org
initially that did not give them presumptive renewal. Presumptive
renewal does not exist in most government contracts, or other business
contracts. They were aware of this from the beginning. ICANN will have
no trouble finding alternate registry operators who are willing to bid
on operation of the .biz/info/org registries for fixed terms. Indeed, I
imagine these same registry operators, and perhaps VeriSign, DENIC,
Nominet, and others would be aggressively bidding at even lower prices
than exist today for fixed term new deals. This would benefit
consumers.

One only need look at the example of our friends at Neustar, who agreed
to LOWER their telephone database management pricing, in exchange for a
contract extension:

http://gnso.icann.org/mailing-lists/archives/ga/msg04807.html

"The contracts have been extended by 48 months to June 2015. Pricing
remains unchanged at $1.05 through the rest of the year, the company
said, and in 2007 transactions will cost 91 cents each regardless of
volume. Beginning in 2008 until the contract expires, transaction rates
will range from 95 cents to 75 cents depending on volume."

""You can't complete a telephone call in the U.S. without using
NeuStar," Ganek says. "We cannot charge monopoly rents; we have to
share the benefits of fast volume growth with our industry?"

As I wrote before, it is perfectly consistent to have renewals of
contracts with price cuts, and allow the registry operators to have
enough money to invest in infrastructure, yet share the benefits of
economies of scale with consumers. ICANN's feeble negotiators seem to
have ignored this economic reality, because they fall for the FUD
spread by incumbent registries.

You can't fault registry operators for trying to get a price increase,
and lock out competitors -- that's in the interest of their
shareholders.  But, ICANN should see through their smokescreen, and be
negotiating price cuts. There's no "presumptive renewal" for Neustar in
these telephoone deals, either.

How can Neustar, and the other registry operators, argue that they
require presumptive renewal, when they are signing very similar
technological deals like telephone database management that DO NOT
CONTAIN PRESUMPTIVE RENEWAL? (and certainly differential pricing
doesn't exist for telephone number management)

In conclusion, one must ask whether the registry operators think that
ICANN, its Board, and the public are that stupid, to not see that price
decreases, price caps, uniform pricing and fixed-length contracts are
the norm? While one must applaud the registries for trying to take
advantage of the likely inexperienced and inept ICANN staffers who
think these contracts are somehow acceptable, anyone with an iota of
business experience can see that these are terrible deals for the
public.

In the wise words of Vint Cerf,

http://www.infoworld.com/article/06/07/17/HNnetneutralitypioneers_1.html?BROADBAND

"What's worse than a regulated monopoly? The answer is, an unregulated
monopoly."

By approving these proposed contracts, ICANN would be creating new
unregulated monopolies, to the detriment of the public. ICANN's Board
hopefully has the business acumen and experience to reject these
proposed contracts, and ensure that any new proposed contracts reflect
price decreases, price caps that protect consumers, uniform pricing,
and fixed-length contracts.

Sincerely,

George Kirikos
http://www.kirikos.com/