Opposed to changes in contracts that reduce transparency of pricing, and that provide fee waivers to registries

[George Kirikos <gkirikos@xxxxxxxxx>]

Comments by: George Kirikos
Company: Leap of Faith Financial Services Inc.
Website: http://www.leap.com/
Date: May 31, 2016

ICANN has submitted for public comment proposed changes to the Base New gTLD 
Registry Agreement:

https://www.icann.org/public-comments/proposed-amend-new-gtld-agreement-2016-05-31-en

Two of those changes in particular are unacceptable, namely:

(a) Section 2.10 -- elimination of notice to ICANN of registry fee price 
increases. This proposed change (in both section 2.10(a) and 2.10(b) is 
perplexing and shocking. It would have the effect of registry fees being kept 
secret from the public (since agreements between registrars and registries 
typically contain confidentiality terms). This is unprecedented, and would be 
anti-competitive, and against ICANN's mission. Indeed, one of the ways ICANN is 
supposed to measure competitiveness is through things like wholesale pricing, 
yet now ICANN proposes to keep that valuable information from the public's 
eyes? Truly unbelievable, and unacceptable. TLDs are a public resource, not the 
private property of registry operators. They knew of the public notice 
requirements when they applied for new gTLDs. This is a one-sided change in 
favour of new gTLD operators, that does nothing for the public, and indeed will 
have harmful and anti-competitive impacts on consumers. And ICANN now proposes 
to deprive the public the ability to even measure that level of 
anti-competiveness, by removing the ability to see the true fees being charged 
to registrars (and the increase in those fees), which provide the baseline by 
which consumers ultimately get charged.

Furthermore, nothing in the RAA requires registrars to provide notice to 
consumers (registrants) of the price increases that registry operators have 
made. Thus, the only protection some registrants might have would be via the 
public notice provided to ICANN (and reported on by the media, etc.). ICANN 
proposes to eliminate that protection entirely!

Given vertical integration, registries can "game" these secret price changes 
even further, to the harm of consumers/registrants.

Keeping the fees (and fee increases) secret from the public reduces the 
bargaining power of registrants when negotiating with registrars. Registrants 
would be kept in the dark about how much of a margin registrars are earning for 
the services they provide, and thus there'd be an anti-competitive impact on 
consumers.

Keeping the fees (and fee increases) secret from the public prevents potential 
new registrar "entrants" from assessing whether they could offer a new gTLD to 
consumers more cheaply than other existing registrars. Some registrants might 
even want to *become* accredited registrars in order to eliminate price gouging 
by their current registrars, and this lack of transparency regarding true 
registry fees would reduce that possibility.

Keeping the fees (and fee increases) secret from the public also affects the 
secondary market for domain names, as "insiders" with secret knowledge of fee 
increases could (and would) attempt to dupe buyers into purchasing domain names 
that have huge secret fee increases set to take place. Even the possibility of 
that would cause uncertainty, which would affect values to registrants and 
prospective registrants. The only solution is greater transparency, yet ICANN 
proposes even less transparency. Not only does ICANN get things wrong, they get 
things wrong in the worst ways possible!

Lastly, it would obviously set a dangerous precedent for the established 
registries like .com/net/org, who would also demand such a provision in their 
contracts.

It is mind-boggling that ICANN would even propose such a "negotiated" change, 
when it is supposed to act in the public interest. This change alone provides 
strong evidence that ICANN has been captured by the "contracted parties" to the 
detriment of consumers (and registrants in particular) and the public. It 
violates all of the principles in the Affirmation of Commitments regarding 
transparency, competition and consumer trust. 

Given the "revolving door" between ICANN and its contracted parties, it really 
calls into question ICANN's independence and how hard it "negotiates" when it 
would think that such a change, making registry fees a secret unavailable to 
itself the public, would be acceptable to anyone but a few ICANN insiders. 

(b) Section 6.7 (fee reduction waiver). Obviously this is a one-sided change 
that is unacceptable. New gTLD registries signed a contract. ICANN should not 
be granting any fee waivers whatsoever, especially ones that are at its 
discretion and on terms that it "negotiates." ICANN staff (see revolving door 
comment above) have long shown an inability to properly negotiate agreements in 
the public interest. Indeed, ICANN staff once negotiated contracts for 
.biz/info/org that would have eliminated *any* price oversight whatsoever, 
which would have led to tiered/differential pricing on a domain-by-domain basis:

http://www.circleid.com/posts/icann_tiered_pricing_tld_biz_info_org_domain/

(this was overturned after thousands of people supported my call opposing the 
proposed contract)

The ability to negotiate a "waiver" simply invites further mischief and 
misadventures by both ICANN staff and registry operators. All the registry 
operators signed a contract, and knew what they were getting into when they 
signed it. If their business projections didn't turn out right, that's their 
private problem, and not the problem of ICANN or the public. If a particular 
new gTLD is not economic, it should be terminated, or assigned to another 
operator who can run it in a profitable manner. Doing otherwise changes new 
gTLDs into charities looking for handouts, rather than businesses. It would 
turn ICANN into a forum for Crony Capitalism:

https://en.wikipedia.org/wiki/Crony_capitalism

where it would be providing subsidies to losers (in the form of fee waivers). 
ICANN should not be picking the winners and the losers. Losers should fail 
naturally, with clear mechanisms for handling that business failure (i.e. 
termination or assignment to others). It appears that registry operators want 
to "privatize the profits, and socialize the losses."

When a registry operators wants to get a fee waiver, ICANN should simply point 
to the existing contract which doesn't permit it, and that's the end of the 
story. That's a 30 second conversation, i.e. "No can do." While ICANN staff 
would obviously enjoy the opportunity to be wined and dined, to be convinced to 
grant exceptions and waivers, there should simply be no such possibility for 
such mischief and misadventures. Eliminating the possibility for mischief and 
misadventures should become a higher priority at ICANN -- heck, it might even 
lead to major cost savings, with fewer staff needed to listen to and respond to 
such inappropriate requests. 

This proposed change is yet another sign of ICANN's immaturity, that it's not 
ready for prime-time and not ready to be set free from US government oversight. 
Why would it negotiate such a provision? Section 6.7 is an unambiguous 
advertisement for Crony Capitalism, values that are inconsistent with those of 
a free market with a level playing field.

Section 6.7 should be eliminated in its entirety. 

Combined, the proposed changes in Section 2.10 and Section 6.7 reinforce the 
view that the new gTLD experiment has failed, and that ICANN and its contracted 
parties know it. They are clear attempts to hide that failure from the public. 
Given that new gTLDs were the biggest decision ICANN has ever made, a decision 
that they got wrong, they should not be permitted to cover up that failure at 
this critical juncture, when the US government is assessing whether its 
oversight should continue in the future. Indeed, these proposed changes 
demonstrate that ICANN has not learned anything from past mistakes, and that 
they hope to continue with "business as usual" in a less transparent future 
where they can cover up mistakes and make new mistakes with impunity.

Sincerely,

George Kirikos
416-588-0269
http://www.leap.com/