Comment from CFIT

["Berard, John" <John.Berard@xxxxxxxxxxxxx>]

December 7, 2005

 

Mr. Paul Twomey

President and CEO

Internet Corporation for Assigned Names and Numbers

4676 Admiralty Way, Suite 330

Marina del Rey, CA 90292-6601

 

Dear Paul:

 

I am writing on behalf of the Coalition for ICANN Transparency (CFIT) in
response to the call on Sunday, December 4 from ICANN Board Chair Vint
Cert for community comment on the proposed .com deal with VeriSign; a
part of your plan to settle litigation with that company.

 

In keeping with Vint's request, let me begin by offering some
hard-and-fast suggestions for actions that ought to be taken by ICANN
with regard to this negotiated agreement:

 

*         There should be no link between settlement discussions and an
extension of the .com Registry Agreement, under current or new terms.

*         ICANN should set aside the proposed .com agreement and let the
current .com contract run its term, and

*         ICANN should prepare to and then bid the .com contract so as
to ensure the best prices for consumers and the most competitive market.

 

The proposed settlement, which grants VeriSign a seven-year deal to
control the Internet's largest database - the registry of .com domain
names - continues to draw criticism from every corner of the Internet
community.

 

The criticism from registrars, country code managers, at-large delegates
and the business constituency; even the reluctance you heard in
Vancouver from the registry constituency, is based on the fact that the
.com proposal:

 

*         Was granted without public notice, continuing the erosion of
the Internet community's role in determining policy,

*         Locks in price increases adding, by our estimate, $1.5 billion
to the cost to consumers without economic justification as called for in
every other ICANN/registry agreement (except .net, another VeriSign
contract),

*         Allows the ill-logical expansion of VeriSign's (or any
operator of the .com registry's sensible) natural monopoly to the
detriment of competitive segments of the market,

*         Grants near permanent control of the .com database to VeriSign

*         Creates widely disparate aspects across registry agreements,
and

*         Reduces the traditional role of U.S. government oversight.

 

Key aspects of the deal suggest it should not be ratified:

 

1.  Swapping deliberation and decision-making for a deadline.  The 1999
Memorandum of Understanding
(http://www.icann.org/general/icann-mou-25nov98.htm) signed at the
founding of ICANN provides the U.S. Department of Commerce with
review-and-approval on changes to the management of the Internet.  In
the proposed .com agreement, the decision-tree for creating contentious
new services affecting the competitive market now only require a 45-day
waiting period.  Absent a clear yes-or-no from Commerce, disruptive
services could still be implemented on day 46.

*         The approval process must be reinstated.

 

2.  At the same time, Commerce is not the stated agency of
responsibility.  The proposed contract allows a new service deemed to
have competitive effect on the Internet to be directed to the
"appropriate government agency" -- presumed to be, but not necessarily,
Commerce or even an agency of the U.S. government - for review.

*         The agencies tasked under the 1999 MoU with review of ICANN
decisions, should confirm and carry-out their intention to do so.

 

3.  Under the deal's terms, it will now be the role only of the ICANN
staff to determine if a proposed registry service will have affect the
stability of the Internet or the competitive market.  Traditional
channels of review and consent are shut off to registrars and
registrants, too.  And by shifting from registrars to registries the
responsibility for payment of fees, the role of registrars and
registrants is reduced further, without reducing the financial burden on
them.

*         The Policy Development Process must be the mechanism for new
services.

 

4.  It creates an unjustified and unilateral cost increase to consumers.
The proposed contact, to be put in place two years before the current
contract expires in November 2007, would set prices for a seven year
period at a level $750 million higher than the current contract and $1.5
billion higher than a contract competitively bid.  This "tax" will be
borne by consumers and put uneven economic pressure on small-to-medium
size registrars.

 

The fact is that VeriSign's bid on the .net contract was one-third less
than the current price of a domain name in the .com contract, yet the
.com market is 10 times larger.  Assuming even a modest "economy of
scale" effect, a competitive bid for .com would be lower still.  Other
companies are on record with just such a lower bid.

*         Prices must be set by the market.

 

5.  It is clear that the deal was coerced by litigation.  By forcing
ICANN to spend millions of dollars a year to defend the stable and
secure operation of the Internet, VeriSign put a strain on the
organization's ability to perform at a level expected by the community.


 

Rather that seek legal resolution, the staff of ICANN capitulated to get
out from under the cost of litigation that many legal experts felt the
organization had a good chance of winning.  The procedure sets a
terrible precedent that, in light of diminished governmental oversight,
allows the world to see that ICANN has put itself in the control of
VeriSign. 

*         The issue of settlement must be seen as separate from new .com
terms.

 

6.  The .com registry is being given to VeriSign in perpetuity

In the 2001 agreement designating VeriSign as the registry, "presumptive
renewal" was written in to the contract on a one-time basis.  And, in
light of the value of that one-time extension (a trade-off for a
guarantee of stability), a specific set of performance commitments were
written into the deal.  If any one was violated, presumptive renewal was
off the table.  The commitments were:




Page 3

 

If "(a) Registry Operator is in material breach of this Registry
Agreement, (b) Registry Operator has not provided and will not provide a
substantial service to the Internet community in its performance under
this Registry Agreement, (c) Registry Operator is not qualified to
operate the Registry TLD during the renewal term, or (d) the maximum
price for initial and renewal registrations proposed in the Renewal
Proposal exceeds the price permitted under Section 22 of this Registry
Agreement."

 

On November 12, 2004 papers filed by ICANN in California court

(http://www.icann.org/legal/VeriSign-v-icann/icann-cross-compl-12Nov04.P
DF) asserted such a breach: "By initiating this cross-complaint, ICANN
seeks a declaration of VeriSign's obligations under the .com agreement
and a determination that VeriSign has breached its obligations under the
agreement."

 

The lack of transparency is also a breach of the 2001 agreement.  It
states that "...Registry Operator may, no earlier than twenty-four and
no later than eighteen months prior to the Expiration Date, submit a
written proposal to ICANN for the extension of this Agreement for an
additional term of four years (the "Renewal Proposal"). The Renewal
Proposal shall contain a detailed report of the Registry Operator's
operation of the Registry TLD and include a description of any
additional Registry Services, proposed improvements to Registry
Services, or changes in price or other terms of service." 

*         The deal should be set aside, the current contract allowed to
run its course and be competitively re-bid on the existing time-table.

 

Finally, the proposed deal circumvents the explicit checks-and-balances
granted the Internet community by abandoning one of the four core
principles of ICANN, as codified in the 1999 MoU, is a "bottom-up
consensus."  As stated: "A private coordinating process is likely to be
more flexible than government and to move rapidly enough to meet the
changing needs of the Internet and of Internet users. The private
process should, as far as possible, reflect the bottom-up governance
that has characterized development of the Internet to date."

 

Paul, these are urgent matters that demand quick action to repair
community confidence in ICANN, restore a shared understanding of the
decision-making process and retain a vibrant, vital competitive
marketplace.  It is the source of innovation and growth.

 

Sincerely,

 

 

John Berard
on behalf of the Coalition for ICANN Transparency