Discouraging ICANN from signing .com agreement

["Grote, Henning" <Henning.Grote@xxxxxxxxx>]

We recommend against ICANN signing the proposed .com Registry Agreement.
The following reflects those issues that are of foremost concern to us:
 
 
1.    New Registry Services 
 
The proposed .com contract locks ICANN and VeriSign in for three years
on a version of the consensus policy covering the standards and process
for consideration of new registry services.  The new registry services
consensus policy process that recently was approved by the ICANN board
is untested, and it is likely that the ICANN community will need to
refine and improve it after it is implemented.  A three year lock will
unnecessarily handcuff ICANN and the ICANN community.
 
We recommend the deletion of Sections 3.1(b)(v)(B) and 3.1(b)(v)(C), and
allowing the existing ICANN policy development and refinement process to
be used during the term of the agreement.
 
 
2.    Registry Agreement Renewal
 
According to its own Bylaws and the Memorandum of Understanding between
ICANN and the United States Department of Commerce, one of ICANN's core
missions is to promote competition.  We understand that the current .com
contract contains a "presumptive renewal" provision, which by its nature
hinders competition.  The proposed .com contract, however, goes much
farther than the existing contract by strengthening the presumptive
renewal and termination provisions on behalf of VeriSign, thereby making
it virtually impossible for VeriSign to lose the .com registry and
impossible to reap the benefits of competition.  VeriSign should be
appointed as the administrator of the .com registry, not its owner.
 
We recommend reverting from Section 4.2 of the proposed .com agreement
to the renewal terms of Section 25 of the current .com agreement, which
requires a six month review of a "Renewal Proposal" provided by VeriSign
and only under terms that are in "substantial conformity with the terms
of registry agreements between ICANN and operators of other open TLDs.
. ."   ICANN also should strengthen the termination provisions currently
contained in Section 6.1 of the proposed agreement by using the relevant
text from Sections 16(B-E) of the current agreement.
 
 
3.    Registry Fees
 
The proposed .com contract would permit VeriSign to unilaterally raise
registration fees by 7% per year.  The existing .com contract and all
gTLD registry agreements (other than the .net agreement with VeriSign,
which was entered into without community input in violation of ICANN's
Bylaws) require the registries to cost-justify any price increases.  In
an industry where the economics suggest that fees should be going down
when there is competition, it is particularly troublesome and
anti-competitive to grant a monopolist or a single source provider the
unilateral right to increase costs without justification.
Unfortunately, these fee increases would result in cost increases to
individual registrants.  We note that in the recent competitive process
for .net, VeriSign significantly lowered its registry fees.  There is no
reason for unilateral cost increases for the larger .com registry.   
 
We recommend that the Board delete the current text of Section
7.3(d)(ii) and replace it with Section 22(A) of the current .com
agreement requiring VeriSign to justify and ICANN to approve any
proposed fee increase.  If there is a dispute between ICANN and VeriSign
over a cost increase, ICANN should have the right to seek competitive
price proposals from other registry operators to ensure that the ICANN
community receives the benefits of competition.
 
 
4.    New ICANN Fees
 
ICANN and VeriSign propose a new ICANN fee that would be assessed on
VeriSign and passed on to the registrars.  This fee would result in
excess of approximately $150 million dollars to ICANN, and would be an
end run around the existing ICANN budget approval process.  As proposed,
ICANN staff has removed an important check on the ICANN budget process.
All ICANN fees that impact registrants should be subject to the ICANN
budget approval process and should not only be the subject of
negotiations between VeriSign and ICANN.   
 
In addition to the changes suggested in number 3 above, we recommend the
removal of Sections 7.3(g-h) in the proposed contract.  Any transaction
fees that ICANN needs to collect from registrars (and hence registrants)
should be assessed through the current transaction fees charged by ICANN
to registrars and be subject to the existing budget approval process.
 
 
While we understand the desire to finalize the litigation, it should not
be done so without a sufficient review process nor at the expense of
major tenets of ICANN's mission.  In its current form, it is a bad
settlement for ICANN, the ICANN community, and the public-at-large.  We,
therefore, urge the ICANN Board to take advantage of the six month
review of a "Renewal Proposal" contemplated in the existing .com
agreement, which doesn't expire until November 2007.  The Board should
use this time to review the complicated contracts in their entirety,
have a public comment period commensurate with the importance of the
issue, and make the changes necessary to improve the agreement.

Henning Grote
___________________________ 
Deutsche Telekom AG
T-Com Headquarters
Production Preparation IP - TK44
Ammerlaender Heerstrasse 138
26129 Oldenburg, Germany
Phone: +49 441 234-4570
Fax:     +49 431 7163 9269
email:   henning.grote@xxxxxxxxx