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Please don't renew the .com agreement without a policy to guide such a renewal

  • To: <revised-settlement@xxxxxxxxx>
  • Subject: Please don't renew the .com agreement without a policy to guide such a renewal
  • From: "Bruce Tonkin" <Bruce.Tonkin@xxxxxxxxxxxxxxxxxx>
  • Date: Fri, 17 Feb 2006 19:23:18 +1100

Hello All,

It seems to me that there has been a significant shift in the way the
ICANN Board and ICANN staff are treating the .com and .net agreements.

I had assumed that we were operating under the following model:
- the rights to the domain name spaces .com and .net were held by ICANN
representing the Internet community 
(ie effectively ICANN was the registrant for .com and .net)
- ICANN had an agreement with a registry operator to provide a domain
name services associated with those name spaces
- the network operator provided that service to the ICANN at an agreed
price for a fixed term
- there were mechanisms for that price to change if there was a
- the .net agreement was put out for competitive bid, and a lower price
was obtained

Later in 2005, I noticed the following changes in approach
- the .net agreement had a perpetual renewal clause - limiting the
ability to ever go out again for a competitive bid
- the original signed .net agreement only held price constant for the
first year, and then after that the operator could charge any fee to the
community.  This was subsequently changed to at least limit the possible
price rises.

This effectively amounted to providing one company with the same rights
for the whole of .net, as an individual registrant within .net.  Ie
Verisign effectively became the registrant of .net, rather than the
technical contact.

If this was the approach ICANN was going to pursue, they should have
simply held an auction for .net, amongst bidders that were approved (ie
met technical standards).  All participants in the .net tender process
were found to be technically capable of operating .net.  The funds
gained from that auction could have funded ICANN for the foreseeable

We now find that in order to settle a legal dispute with Verisign, that
ICANN is effectively prepared to make Verisign the full registrant for
.com.    ICANN has consistently maintained that it was in the right with
respect to the legal dispute, and would ultimately win the dispute.  The
reason for the sudden back-down is puzzling.   We are told that Verisign
has presented a take-it-or-leave it deal, with the alternative being
continued litigation.  If this is the only option, then I recommend that
the ICANN Board leave the deal on the table and persist with litigation
until it wins.   If ICANN needs further funds to pursue that litigation,
then it should seek these funds through the budget process.  By settling
the litigation with Verisign, it seems that the Board has only replaced
Verisign with other litigants who are opposed to the decision.   Right
now the cost of additional litigation with Verisign seems far lower than
the value being given away in return, and the increased prices that will
be paid for .com names.

I had thought that the original driver of the litigation was to settle
the disputes associated with ICANN's processes for approving registry
services.  This process is now resolved, and ICANN has approved a
consensus policy in this area. Ie the legal dispute should be over.

The GNSO Council is now initiating policy development processes to
discuss issues such as the introduction of new gTLDs, and a review of
policies for existing gTLDs that relate to renewal and whether there
should be some sort of pricing control.

It may well be that a future model assumes that each of the registry
operators operating a top level domain name is essentially a domain name
registrant, and that they are free to commercialise their namespace any
way they wish provided that they meet Internet technical standards and
comply with the law.   These operators would freely compete.  If this is
a future model then there should be a transition approach to get to that
model for the existing registry operators.  In this case, .com should be
put up for sale (with the funds going towards ICANN activities
consistent with its mission), and then the new (or existing) registry
operator would then be free to charge whatever the market would pay.  I
suspect that Verisign thought it was buying .com when it purchased
Network solutions - but I thought that they had paid too much for a
fixed term service contract.   It now seems like they did indeed buy

I recommend that the Board take a two phase approach here:

Phase 1
- update the existing .com agreement with respect to the many
improvements in the proposed agreement related to definitions of
registry services, mechanisms for dispute resolution etc
- this should address most of the issues that were the subject of the
original litigation
- leave the current expiry date November 10, 2007 , renewal and pricing
provisions in the current .com agreement unchanged
- under the current provision, Verisign could apply for a 7% (or higher)
increase with justification
- continue litigation if necessary

Phase 2
- wait until the outcome of the current policy processes that are due to
complete in 2006 to advise the Board on the community's preferred
approach with respect to the structure of the gTLD namespace
- allow Verisign to submit a renewal proposal under section 25A of the
existing agreement
- consider what form the new .com agreement should take (e.g an
agreement for another term with a certain price, or effectively a
perpetual licence to operate .com with the operator free to set its own

I recognize that the provisions of the existing contract would place
some limitations on the options for phase 2, but we should start with a
full analysis of the issues and the development of an effective long
term policy.

I would also like to be clear that I believe that Verisign has provided
an excellent service for .com and .net.  I have no problem recommending
them as an appropriate service provider.  My main issue is that the
proposed agreement moves from a service agreement, to effectively a
licence agreement to operate .com as a registrant, without any real
process for making that change.

Bruce Tonkin

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