Verisign stock punished after US move from root control

Kevin Murphy, March 17, 2014, Domain Registries

Verisign’s share price is down around 8% in early trading today, after analysts speculated that the US government’s planned move away from control of the DNS root put .com at risk.

The analyst firm Cowan & Co cut its rating on VRSN and reportedly told investors:

With less US control and without knowledge of what entity or entities will ultimately have power, we believe there is increased risk that VRSN may not be able to renew its .com and .net contracts in their current form.

It’s complete nonsense, of course.

The US announced on Friday it’s intention to step away from the trilateral agreements that govern control of the root between itself, ICANN and Verisign. But that deal has no dollar value to anyone.

What’s not affected, as ICANN CEO Fadi Chehade laboriously explained during his press conference Friday, are the contracts under which Verisign operates .com and .net.

The .com contract, through which Verisign derives most of its revenue, is slightly different to regular gTLD contracts in that the US has the right to veto terms if they’re considered anti-competitive.

The current contract, which runs through 2018, was originally going to retain Verisign’s right to increase its prices in most years, but it was vetoed by the US, freezing Verisign’s registry fee.

So not only has the US not said it will step away from .com oversight, but if it did it would be excellent news for Verisign, which would only have to strong-arm ICANN into letting it raise prices again.

Renewal of the .com and .net contracts shouldn’t be an issue either. The main rationale for putting .com up for rebid was to improve competition, but the new gTLD program is supposed to be doing that.

If new gTLDs, as a whole, are considered successful, I can’t see Verisign ever losing .com.

Verisign issued a statement before the markets opened today, saying:

The announcement by NTIA on Friday, March 14, 2014, does not affect Verisign’s operation of the .com and .net registries. The announcement does not impact Verisign’s .com or .net domain name business nor impact its .com or .net revenue or those agreements, which have presumptive rights of renewal.

Roundup: industry reaction to US giving up IANA role

Kevin Murphy, March 16, 2014, Domain Policy

Members of the domain name industry and ICANN community reacted generally positively to the news Friday night that the US will step aside from its central role in ICANN oversight.

Several companies, organizations and individuals issued early statements in response. We present a summary of those to hit the wires so far here.

First, the so-called I* organizations (IETF, IAB, RIRs, ccTLD ROs, ISOC, and W3C), which manage the internet’s various technical functions and standards, issued a joint statement via ICANN:

Our organizations are committed to open and transparent multi-stakeholder processes. We are also committed to further strengthening our processes and agreements related to the IANA functions, and to building on the existing organizations and their roles. The Internet technical community is strong enough to continue its role, while assuming the stewardship function as it transitions from the US Government.

The Domain Name Association’s executive director Kurt Pritz said this:

The DNA welcomes a deliberate, thoughtful process, inclusive of all stakeholder views to determine the future of the IANA function. As our members are some of the most widely recognized customers of IANA, we will be playing an active role in the process moving forward. The US government performs admirably in this role and it is important that any new oversight mechanism perform as reliably and consistently, and in a manner that prevents the Internet from onerous regulations and/or content controls.

New gTLD portfolio applicant Donuts said:

The IANA function is very important to Internet stability, and Donuts supports the multistakeholder approach to managing this vital resource. As the largest applicant for new top-level domains, we look forward to providing a constructive contribution in this multi-stakeholder discussion. It’s critical that any new mechanisms for IANA oversight ensure not only stability and accountability but also uphold the vital public sector role in promoting Internet innovation and openness.

Lisa Hook, CEO of back-end registry provider Neustar, said in a press release:

We share the US government’s view that the time has come for ICANN to convene global stakeholders to develop the policies, procedures, and accountability framework needed to transition ultimate responsibility for the IANA functions, and we look forward to participating in that process.

Back-end and portfolio applicant Afilias said in its own press release:

We endorse the statements of the NTIA and the organizations noted above [the I*s] with respect to the maturation of these organizations and processes, and we are committed to continuing to contribute to the stewardship of the Internet as part of a globally inclusive, open and transparent multi-stakeholder community.

Michele Neylon, CEO of domain name registrar Blacknight Solutions said:

This is an incredibly historic and important day for Internet governance. As a member of the International governance and infrastructure communities I applaud this move away from a single government to a regulating body that represents the interests of the global community. However, the real challenge now lies ahead in identifying and implementing a strong, diverse community to oversee these crucial organizations.

Milton Mueller, the principal academic behind the Internet Governance Project blogged:

IGP has been leading the call for the US government to be consistent about its non-governmental approach to Internet governance since 2005. Naturally, we were gratified to see the Commerce Department finally come around to that position. Far from “giving up” something or “losing control,” the U.S. is sure to find that its policy has gained strength. We have just made it a lot harder for opponents of a free and open Internet to pretend that what they are really against is an Internet dominated by one hegemonic state.

The news broke rather late on a Friday night, with an NTIA press release and hastily convened ICANN press conference, after the story was leaked to the Washington Post.

There hasn’t been much time for formal written reactions yet, but I’m sure more will be forthcoming as people get into work on Monday morning.

Belgians do want a piece of Donuts’ new gTLD action

Kevin Murphy, March 16, 2014, Domain Policy

The Belgian government is blocking approval of Donuts’ bid for the new gTLD .spa until the company agrees to hand over up to 25% of its .spa profits to the community of the city of Spa.

It emerged in a letter from Spa published by ICANN this weekend that the city is also demanding a role in managing the TLD at the registry operator’s expense.

The gTLD has been applied for by Donuts and the Asia Spa and Wellness Promotion Council.

Not only does the string .spa match the name of the city, but also the English dictionary word “spa” is actually named after Spa, which has been known for centuries for its “healing” springs.

Despite this, Spa is not a capital city — it has roughly 10,000 inhabitants — so it does not qualify as a protected geographic string under the rules of ICANN’s new gTLD program.

Spa nevertheless wants a role in the TLD’s management, in order to protect the interests of itself and its local community, and wants some of the profits to benefit its local businesses.

According to the letter (pdf) from Spa outside attorney Phillippe Laurent, ASWPC has already signed a memorandum of understanding with the city. That MoU, published with the letter, states:

The turnover generated by the exploitation of the .SPA registry will be used in priority to defray reasonable out-of-pocket expenses incurred by the City as a result of its participation in the SPARC or any other of its activity related to the management and governance of the .SPA extension.

Additionally, 25% of the net profit generated by the domain names registered in the .SPA registry by any Belgian, Dutch, Luxembourgish, French or German person or entity will be earmarks to be contributed towards Internet and spa & wellness activities development in and for the City of Spa and its region, especially as related to the scope of the “.SPA” TLD, to be directed by the City of Spa.

The deal would also see ASWPC reserve 200 .spa domain names (included potential premiums such as poker.spa and golf.spa) for the city to do with as it pleases.

Donuts has refused to sign the MoU, saying it’s inconsistent with the Applicant Guidebook and sets a “bad precedent”. Spa has therefore refused to endorse its application.

The city has its national government on its side. In the April 2013 Beijing communique of the ICANN Governmental Advisory Committee, the GAC listed .spa as one of several bids needing “further consideration”.

This was reiterated in its Durban and Buenos communiques, with the GAC noting that “discussions” between “relevant parties” were “ongoing”.

Essentially, the GAC is delaying .spa from approval while Spa tries to get Donuts to agree to hand over part of its of .spa profits.

There was a somewhat testy exchange at the Buenos Aires meeting in November, after an ICANN director asked the GAC if it was appropriate for a governmental entity to try to get a financial benefit from an applicant.

The Belgian GAC representative responded later that “no money will flow to the city of Spa”, conceding that “a very small part of the profits of the registry will go to the community served by .spa”.

That now seems to be not entirely accurate.

The MoU sees Spa getting reimbursed for its self-imposed cost of inserting itself into the management of the registry, so some money will flow to it. But it will presumably be revenue-neutral to the city.

The issue of the 25% profit cut is a bit ambiguous though.

While the money would not flow directly into city coffers, the city would get the ability to direct how it was spent. Presumably, it could be spent on projects that Spa locals would otherwise look to the city to pay for.

With Donuts and Spa apparently at an impasse, ICANN recently told the GAC that it won’t sign contracts with either applicant, yet, but that it wants “a timeline for final consideration of the string”.

It also wants the GAC to “identify the ‘interested parties’ noted in the GAC advice.”

With Laurent’s letter and the MoU seemingly spelling out exactly what Spa wants and why, perhaps ICANN can move the issue closer to resolution at the Singapore meeting next week.

Is it a shakedown? Is it appropriate behavior for the GAC to hold an application hostage while it tries to obtain financial benefit for its local businesses? Or is Donuts unreasonably trying to exploit a city’s centuries-old cultural heritage for its own economic gain?

US to give up control over ICANN

Kevin Murphy, March 15, 2014, Domain Policy

In what can only be described as an historic announcement, the United States government tonight said that it will walk away from its control of the DNS root zone.

ICANN CEO Fadi Chehade said during a press conference tonight that the organization has begun a consultation to figure out “accountability mechanisms” that will replace the US role as ICANN’s master.

The news comes in the wake of Edward Snowden’s revelations about US spying, but Chehade and ICANN chair Steve Crocker said that the changes would have been made sooner or later anyway.

So what just happened?

Earlier this evening, the US National Telecommunications and Information Administration announced its “intent to transition key Internet domain name functions to the global multistakeholder community.”

That’s basically referring to the IANA contract, the US government procurement contract under which ICANN has the ability to make changes — essentially by recommendation — to the DNS root zone.

The current version of the contract is due to expire next year, and the hope is that when it does there won’t be any need for a renewal.

Between now and then, the ICANN community (that’s you) is tasked with coming up with something to replace it.

It’s going to be the hottest topic at the ICANN 49 meeting in Singapore, which kicks off a week from now, but it’s expected to be under discussion for much longer than that.

Chehade said during the press conference tonight that the idea is not to create a new oversight body to replace the NTIA. We seem to be talking about “mechanisms” rather than “organizations”.

He also said that the US government has made it plain that any attempt to replace the US with an intergovernmental body (ie, the International Telecommunications Union) will not be considered acceptable.

Whatever oversight mechanism replaces NTIA, it’s going to have to be “multistakeholder” — not just governments.

The root zone is currently controlled under a trilateral relationship between the NTIA, ICANN and Verisign.

Essentially, ICANN says “add this TLD” or “change the name servers for this TLD” and, after the NTIA has approved the change, Verisign implements it on its root zone servers. The other root zone operators take copies and the DNS remains a unique, reliable namespace.

The NTIA has said that it’s going to withdraw from this relationship.

One question that remains is whether Verisign will retain its important role in root zone management.

Chehade appeared slightly (only slightly) evasive on this question tonight, spending some time clarifying that Verisign’s root zone management contract is not the same as its .com contract.

I assume this prevarication was in order to not wipe billions off Verisign’s market cap on Monday, but I didn’t really get a good sense of whether Verisign’s position as a root zone manager was in jeopardy.

My guess is that it is not.

A second question is whether the US stepping away from the IANA function means that the Affirmation of Commitments between the US government and ICANN also has its days numbered.

Apparently it does.

Chehade and ICANN chair Steve Crocker pointed to the ICANN board’s decision a few weeks ago to create a new board committee tasked with exploring ways to rewrite the AoC.

And they said tonight that there’s no plan to retire the AoC. Rather, the idea is to increase the number of parties that are signatories to it.

The AoC, it seems, will be ICANN’s affirmation to the world, not just to the US government.

French registrar gets Whois data waiver

Kevin Murphy, March 14, 2014, Domain Registrars

The French registrar OVH has been told by ICANN that it can opt out of a requirement to retain its customers’ contact data for two years after their domain names expire.

The move potentially means many more registrars based in the European Union will be able to sign the 2013 Registrar Accreditation Agreement and start selling new gTLD domains without breaking the law.

OVH was among the first to request a waiver to the 2013 RAA’s data retention provisions, which EU authorities say are illegal.

ICANN said last night:

ICANN agrees that, following Registrar’s execution of the 2013 RAA, for purposes of assessing Registrar’s compliance with the data retention requirement of Paragraph 1.1 of the Data Retention Specification in the 2013 RAA, the period of “two additional years” in Paragraph 1.1 of the Data Retention Specification will be deemed modified to “one additional year.”

It’s a minor change, maybe, and many EU-based registrars have been signing the 2013 RAA regardless, but many others have resisted the new contract in fear of breaking local laws.

Now that OVH has had its waiver granted, it’s looking promising that ICANN will also start to allow other EU registrars that have requested waivers to opt-out also.

ICANN has been criticized for dragging its feet on this issue, and I gather the OVH is still the only registrar to have been given the ability to opt out.