RE: [ga] Responses by .biz/info/org Registry Operators are Unacceptable

["Michael D. Palage" <Michael@xxxxxxxxxx>]

George:

I just saw your response to my GA posting on the .BIZ, .INFO and .ORG
public forum and I wanted to quickly reply.

Clearly we have a difference of opinion regarding the fundamental nature
of what a new ICANN registry contract should look like. I believe is
fair to state that you favor a registry contractual framework in which
ICANN acts in a regulatory fashion prescribing such things as maximum
pricing. Now historically that was the nature of the registry contracts.
However, the ICANN Board over the past several years have taken a
conscious effort to extricate itself from any perceived regulatory role,
and in place provide safeguards that defer such competition question to
appropriate national competition authorities. Although I voiced
significant opposition to the how the transition initially took placed,
I believe that it is probably the best long term approach.

Thus the two choices that the ICANN Board will have to decide between
when it deals with the proposed .biz, .info and .org registry contracts
are as follows: (Option A) continue forward with registry contracts that
remove ICANN from a perceived regulatory role, particularly in this case
of non-dominate registry operators with single digit market share power
or (Option B) a return to contracts that seek to create safeguards and
develop in-house expertise to address regulatory market forces.

With regard to tiered/variable pricing, although other registries may be
providing these services, if the registry operators for .biz, .info or
.org wanted to propose similar services within the context of their
proposed restrictions, such services would have to go through the ICANN
funnel and the public examination process just as the two funnel
requests that the Board will be considering today. Should staff during
this review determine that these services raise competition issues, they
can refer the proposal to an appropriate national competition authority.
Again, there are safeguards in place to address your concerns,
unfortunately the community does not seem to have very much confidence
in staff to execute in good faith the contracts that the Board approves.

Thanks again for your constructive dialog on this issue.

Best regards,

Michael D. Palage






Hello,

--- "Michael D. Palage" <Michael@xxxxxxxxxx> wrote:
> Although a lot has been said about the proposed .BIZ, .INFO and .ORG
> contracts lets talk about what has not been said. Most of the vocal
> people in this current debate could care less about the .BIZ, .INFO
> and
> .ORG contracts, but only care about its potential impact in
> connection
> with the VeriSign .COM contract. You yourself even admitted the same
> during our exchange on the BC list, when you admitted that neither
> .BIZ
> or .INFO had any market power. 

I care about the .org contract (I and others have nice .org domain
names). I care about the .biz and .info contracts just as an older
brother would care about his younger siblings, that they not be thrown
under the bus, as well as the precedent value for .com.

.biz and .info have limited market power for brand new registrations
(not counting reserved names, which do have some value). However, they
*do* have market power for existing registrations, due to the "lock-in"
effect and costs to transition to other domains.
 
> Now I think the proposed wording by the registry operators is not
> unreasonable, and here is why. Both of us agree that the reasonable
> expectation interests of registrants need to be protected. For the
> purposes of this discussion lets use VALUABLE-DOMAIN-NAME.TLD that
> was
> registered by a registrant for $9 of which $6 went to the registry
> operator. Now lets suppose that the management of a registry operator
> wanted to do something really stupid and greedy and decided to raise
> the
> price of all renewals to $1000.

Notice you never suggest they're going to reduce prices. :) Something
is anti-competitive when higher prices result for consumers that would
not have otherwise been the case.

http://www.usdoj.gov/atr/overview.html

"They prohibit a variety of practices that restrain trade, such as
price-fixing conspiracies, corporate mergers likely to reduce the
competitive vigor of particular markets, and predatory acts designed to
achieve or maintain monopoly power."

Presumptive renewal would go along with that. What's funny is that
ICANN thinks "presumptive renewal" is so normal, yet if you do a Google
search for "presumptive renewal", virtually *ALL* of the matches have
to do with ICANN, lol.

http://www.google.com/search?hl=en&q=%22presumptive+renewal%22&btnG=Goog
le+Search
 [15,400 matches]

http://www.google.com/search?num=30&hl=en&lr=&safe=off&q=%22presumptive+
renewal%22+-icann+-verisign&btnG=Search
 [search of "presumptive renewal" excluding "ICANN" and "verisign" --
74 matches, lol]

> Under the proposed wording of the
> Afilias and Neustar modified contractual language that would not be
> possible. Because all new and renewal registrations need to be
> charged
> at a uniform rate, the only exception being in connection with
> marketing
> programs. 

Bzzt, wrong answer. Given *sponsored* gTLDs already have the ability to
set prices any way they want, these *unsponsored* gTLDs now essentially
want the same thing, as the exception language would get triggered
easily, i.e. 

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

Notice that they don't make a distinction between sponsored or
unsponsored gTLDs. Take a look at page 44 of the .asia proposed
Appendix (which is probably similar to what's in .mobi, .tel, .cat,
etc.), for example:

http://www.icann.org/tlds/agreements/asia/registry-agmt-app-28jul06.pdf

"Registry Operator shall have delegated authority to develop policy for
the TLD in the following areas: 
......c. Pricing."

That's essentially what .biz/info/org want, too.
 
> Thus the only way registry operator would be able to charge $1000
> dollars per domain name year was if they charged all registrants (new
> and renewal) $1000 per domain name year. Now if a registry operator
> was
> stupid enough to try that particular move here is what would happen.
> Because of the six month notice period, coupled with the ten year
> maximum registration period, all registrants would max out their
> registration agreements at the lower $6 rate. After the registry
> raised
> their rates, there would likely be no new registrants into the space
> at
> the $1000 per domain name year rate, and the registry would
> eventually
> fail in 10 years after all of the existing registrants migrated
> toward a
> new TLD.

Not necessarily, as they could charge $1000 per domain name for
existing domain names, and then call any other sales at $6/yr a
"marketing program". They built in another loophole for themselves with
that "marketing program" language, to price discriminate. Take a look
at the newspapers -- some stores have "specials" every day of the year!

> That is what would happen in .BIZ, .INFO and .ORG. Now
> perhaps
> you could argue that registrants would pay the ransom to stay in the
> .COM space, however, that is not relevant to the current issue at
> hand
> regarding the pending .BIZ, .INFO and .ORG contracts.

Wait and see, see below....

> Another hypothetical that has been discussed under the tiered
> variable
> pricing models is how a registry operator could impose per domain
> name
> pricing. Under the proposed restrictions this type of pricing would
> not
> impact active domain name registrations. It would only potentially
> apply
> to domain names that have never been allocated (i.e. single or two
> letter domain names) or in connection with domain names that were
> initially registered and then later deleted. In either case there is
> no
> registrant's reasonable expectation interest to protect. Thus as long
> as
> the registrant of VALUABLE-DOMAIN-NAME.TLD maintained his/her
> registration, he/she would never be subject to any tiered variable
> pricing models.

Also, "active" registration is never defined. Is a parked domain
considered "active"? Expired domains, but not yet deleted ones, would
fall under that language with certainty.

So, basically registries want to introduce WLS, etc., another registry
service for dropped domains, but don't want to go through the proper
"New Registry Services" procedures mechanism, to judge their impact on
SnapNames, Pool.com, etc. Gotcha. (of course, unacceptable)
 
> Having read most of the exchanges between you and Jeff Neuman, I
> believe
> you have taken a number of his quotes out of context.

I don't believe so. Folks can read the actual posts for themselves, and
judge. They're in the mailing list archives.

> This is
> unfortunate because this is why many people avoid engaging in an open
> dialog on this and other lists.

What's more likely is that they engaged and provided useful ammo
*against* their position, by revealing things that in hindsight they
shouldn't, or had to say "nothing" when asked a particularly good
question. Their silence spoke volumes. And they've probably been since
ordered not to engage at all, lest they provide more useful ammo for
the opposition. By being silent, and negotiating instead in the
shadows, directly with ICANN staff, they're able to say things that are
not able to be challenged by the public. Just like VeriSign is able to
seemingly get away with talks of "costly DDoS attacks", while never
actually costing it out for the public, or ever disclosing their
Appendix W R&D expenditures, for example.

I doubt the ICANN staffers, for example, were informed enough to know
about Neustar's telephone database management negotiations, for
example, see below. The registries prey on the ignorance of their
incompetent ICANN counterparts, and of course they don't want to make
it easier for the public to help ICANN become better informed.

> With regard to your quotes by
> Neustar's
> CEO Ganek, I believe you are comparing apples to oranges. For example
> NeuStar does have a monopoly over the telephone number space in the
> U.S., I have no choice but to use their service should I want a
> telephone number within the North American number plan. Although each
> registry operator is a sole source provider (monopoly) for their
> respective TLD, as a consumer I have the ability to pick from any one
> of
> a number of TLDs when deciding to create an online presence.

Nope, I'm not comparing apples to oranges. Managing a telephone
database/registry is very similar, technologically, to managing a
domain name database/registry. Indeed, VeriSign was rumoured to be one
of the competitors to Neustar, forcing the prices lower for the
telephone database management contract LOWER, not higher.

http://www.lightreading.com/document.asp?doc_id=104396

?The pricing change may reflect competition, I suspect from players
like Telcordia Technologies Inc. and VeriSign Inc. (Nasdaq: VRSN -
message board), for what are NeuStar's core contracts, and also
represents volume pricing based on continuing growth,? says Heavy
Reading analyst John Longo. ?The real question is how effectively they
continue to manage their performance for the rest of the term of the
contract.?

"NeuStar CEO Jeff Ganek denies his company was pressured by competition
into reducing its rates. Ganek says his company is merely trying to
?strengthen its position? as the sole owner of the contract in the
future."

So, according to NeuStar's CEO,  competitive pressure didn't compel him
to reduce rates. He obviously did so out of the goodness of his heart.
:) If, under no competitive pressure he's lowering rates to "strengthen
its position" as the sole owner of the contract for a few more years,
why do not the .biz/info/org operators, who are under greater
competitive pressure, not be offering even GREATER concessions for
contract extensions? Instead, they want to have their cake (longer
contracts and presumptive renewal) and eat it too (get unlimited
pricing power).

VeriSign's ATLAS has telephone number protocol support:

http://www.verisign.com/stellent/groups/public/documents/white_paper/016
076.pdf
 
By the way, your words: "I have no choice but to use their service
should I want a telephone number within the North American number
plan."

With services like Vonage, etc., I'm able to register a phone number in
many countries around the world, and am not limited to North American
anymore: 

http://www.vonage.com/features.php?feature=virtual_phone_number

Similar to a .com owner who also wants a .net, .org, .biz, .info, .org,
etc., or needs one for brand protection, etc. Welcome to the Real
World.

> So here is the factual scorecard as I see it:

Seen it, or spinned it? :)

> The ICANN Board has approved the following registry contracts (.COM
> and
> .TEL) during the pendency of the Feb-06 PDP. 

Of course, the new .com proposed settlement was never approved by the
DoC, so we're still under the old contract.The .biz/info/org registries
are racing to try to get things approved, before the DoC would wisely
REJECT the proposed .com settlement.

TEL is a *sponsored* gTLD, not an unsponsored one like .biz/info/org.
.biz/info/org don't need to be approved by the DoC, so that's why
mistakes can't be fixed later. 

And of course, the .com registry contracts contain *PRICE CAPS*! Are
you suggesting that .biz/info/org would be happy with price caps too?
If they were, that'd be one less item to argue about.

And, for the folks who want to talk about "context", .com was a
contract negotiated under gunpoint, with a lawsuit. The directors
admitted to that, and likely would not have done the same has the
SiteFinder issue not have been there.
 
> Notwithstanding the ICANN Board's approval of the following registry
> contracts (.TRAVEL, .JOBS, .NET, .MOBI, .CAT, .COM, and .TEL) that
> potentially allowed for tiered/variable pricing, the current registry
> operators have voluntarily agreed to include additional restrictive
> language into their contracts.

.com/net have caps, and undoubtedly VeriSign would ALWAYS choose to
price at the maximum permitted cap price. The other registries are
*sponsored* TLDs, not unsponsored like .biz/info/org. In a sponsored
TLD, registrants can appeal to the sponsoring organization to ensure
that pricing policy is fair.

However, under unsponsored gTLDs, the only protection is ICANN itself.
With these contracts, ICANN would be abdicating its responsibilities to
protect .biz/info/org registrants.
 
> Under the ICANN by-laws, ICANN shall not apply its "practices
> inequitably or single out any particular party for disparate
> treatment
> unless justified by substantial and reasonable cause, such as the
> promotion of effective competition."

Yes, and the .com contract has similar language. So,  you're basically
arguing that precedent value of a bad .biz/info/org contract could be
later be used by VeriSign, arguing that otherwise it's being "singled
out". Thanks.

> In accordance with paragraph 5.2 of the existing Neustar and Afilias
> registry contracts, both registry operators are within the period of
> time during which their contract should have been extended. The only
> reason their contract would not have been extended is if the parties
> could not reach an agreement and the registry contract would need to
> be
> rebid. However, that is not the case as both ICANN and the registry
> operators have agreed upon proposed terms to a new contract.

As Danny Younger correctly pointed out:

http://gnso.icann.org/mailing-lists/archives/ga/msg04985.html

That "detailed report" has never been submitted by the operators of the
.biz and .info registries.

Also, an agreement with incompetent ICANN negotiators/staff is not the
same as one that is approved by the Board. Thus, it's not fair to say
that "both ICANN and the registry operators have agreed" on anything at
all. They engaged in a discussion, a waste of everyone's time, and
hopefully ICANN's Board has the guts to slap them down.

Furthermore, how does it *hurt* ICANN to listen to other competing
proposals? There are either two scenarios:

1) No other prospective registry operator makes a better proposal than
these contracts. In this case, you go with the current contracts.

2) Someone else makes a better proposal. In this case, you either force
Afilias, Neustar and PIR to do better, or you deal with the other
prospective registry operator.
 
> Thus the ICANN Board has two options as I see it:
> 
> (1) Approve the registry contracts that are materially the same as
> the
> recent registry contracts the Board has approved, and allow validly
> constituted policy development processes to make the appropriate
> changes
> as currently set forth in the registry agreements; or

Bzzt. That's a mistake, given that the current proposed contracts
*explicitly* place limits on what the PDP can do. Of course, a wise
lawyer like yourself wouldn't point that out, but will leave it to me,
a non-lawyer, to do the heavy lifting: e.g.:

http://www.icann.org/tlds/agreements/biz/registry-agmt-28jul06.pdf

"3.1 (b)(v) In addition to the other limitations on Consensus Policies,
they shall not: 
3.1 (b)(v)(A) prescribe or limit the price of Registry Services; 
3.1 (b)(v)(B) modify the standards for the consideration of  proposed
Registry Services, including the definitions of Security and Stability
(set forth below) and the standards applied by ICANN; 
3.1 (b)(v)(C) for two years following the Effective Date, modify the
procedure for the consideration of proposed Registry Services; 
3.1 (b)(v)(D) modify the terms or conditions for the renewal or
termination of this Agreement;  "
and so on. Some of us have actually read the contracts, Mike. :)
 
> (2) Reject the contracts and explain the substantial and reasonable
> cause why they have singled out these registry operators for
disparate treatment.

Let competition decide whether the community can get better deals. #2
is also something VeriSign might use, to ask why they're "singled out",
in your words, to not have unlimited pricing power, say relative to
.asia or .mobi (which are SPONSORED gTLDs).

In conclusion, there's only one thing for ICANN's Board to do at
present, which is to sit on their hands and wait for the conclusion of
the Sao Paulo meeting, as per the GNSO Council resolution. Some of the
Board members might actually want to *read* the contracts, and the
public comments.

If ICANN is acting in good faith and wants to maximize the benefits for
domain name registrants (i.e. the public, for whom it serves), and to
promote competition amongst registry operators, it will in the meantime
institute a NO-FEE "Request for Proposals" process, whereby prospective
registry operators are invited to simply submit very short (3 page max)
indications as to whether they might be interested in operating
.biz/info/org, and that ICANN would  be under no obligation to proceed
with any of those proposals. By introducing such a proposal, which only
need take 10 minutes to post on the ICANN homepage, ICANN would be
gaining MORE INFORMATION, which is always valuable in any negotiation.
Perhaps ICANN will eventually do deals with PIR, Neustar, and Afilias,
but it should do so with the MAXIMUM information possible, and not NO
INFORMATION, like at present, as to potential alternatives.

I imagine that prospective registry operators will be lining up to
manage the .biz/info/org registries with:

a) no presumptive renewal
b) no use of traffic data
c) price caps that are *lower* than the current ones.

Prove me wrong, that the proposed .biz/info/org deals are the BEST that
ICANN can negotiate on behalf of the public. Without information, we're
both engaging in rhetoric. However, I'm the one asking for MORE
INFORMATION, whereas it's the incumbent registries who are shaking in
their boots at the prospect of allowing the public to see what other
offers are out there by prospective contracting parties. If incumbent
registry operators were so secure and confident about the high quality
and value of their proposed contracts, they would not fear the scrutiny
that competing proposals would quickly permit. If instead their
proposed contracts are so anti-competive and easily beaten by others,
they are right to be pushing for a quick decision.

Sincerely,

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