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Industry lays into Verisign over .com deal renewal

Kevin Murphy, August 15, 2016, 11:48:55 (UTC), Domain Registries

Some of Verisign’s chickens have evidently come home to roost.
A number of companies that the registry giant has pissed off over the last couple of years have slammed the proposed renewal of its .com contract with ICANN.
Rivals including (sued over its .xyz advertising) and Donuts (out-maneuvered on .web) are among those to have filed comments opposing the proposed new Registry Agreement.
They’re joined by business and intellectual property interests, concerned that Verisign is being allowed to carry on without implementing any of the IP-related obligations of other gTLDs, and a dozens of domainers, spurred into action by a newsletter.
Even a child protection advocacy group has weighed in, accusing Verisign of not doing enough to prevent child abuse material being distributed.
ICANN announced last month that it plans to renew the .com contract, which is not due to expire for another two years, until 2024, to bring its term in line with Verisign’s contracts related to root zone management.
There are barely any changes in the proposed new RA — no new rights protection mechanisms, no changes to how pricing is governed, and no new anti-abuse provisions.
The ensuing public comment period, which closed on Friday, has attracted slightly more comments than your typical ICANN comment period.
That’s largely due to outrage from readers of the newsletter, who were urged to send comments in an article headlined “BREAKING: Verisign doubles .COM price overnight!”
That headline, for avoidance of doubt, is not accurate. I think the author was trying to confer the idea that the headline could, in his opinion, be accurate in future.
Still, it prompted a few dozen domainers to submit brief comments demanding “No .com price increases!!!”
The existing RA, which would be renewed, says this about price:

The Maximum Price for Registry Services subject to this Section 7.3 shall be as follows:
(i) from the Effective Date through 30 November 2018, US $7.85;
(ii) Registry Operator shall be entitled to increase the Maximum Price during the term of the Agreement due to the imposition of any new Consensus Policy or documented extraordinary expense resulting from an attack or threat of attack on the Security or Stability of the DNS, not to exceed the smaller of the preceding year’s Maximum Price or the highest price charged during the preceding year, multiplied by 1.07.

The proposed amendment (pdf) that would extend the contract through 2024 does not directly address price.
It does, however, contain this paragraph:

Future Amendments. The parties shall cooperate and negotiate in good faith to amend the terms of the Agreement (a) by the second anniversary of the Effective Date, to preserve and enhance the security and stability of the Internet or the TLD, and (b) as may be necessary for consistency with changes to, or the termination or expiration of, the Cooperative Agreement between Registry Operator and the Department of Commerce.

The Cooperative Agreement is the second contract in the three-way relationship between Verisign, ICANN and the US Department of Commerce that allows Verisign to run not only .com but also the DNS root zone.
It’s important because Commerce exercised its powers under the agreement in 2012 to freeze .com prices at $7.85 a year until November 2018, unless Verisign can show it no longer has “market power”, a legal term that plays into monopoly laws.
So what the proposed .com amendments mean is that, if the Cooperative Agreement changes in 2018, ICANN and Verisign are obligated to discuss amending the .com contract at that time to take account of the new terms.
If, for example, Commerce extends the price freeze, Verisign and ICANN are pretty much duty bound to write that extension into the RA too.
There’s no credible danger of prices going up before 2018, in other words, and whether they go up after that will be primarily a matter for the US administration.
The US could decide that Verisign no longer has market power then and drop the price freeze, but would be an indication of a policy change rather than a reflection of reality.
The Internet Commerce Association, which represents high-volume domainers, does not appear particularly concerned about prices going up any time soon.
It said in its comments to ICANN that it believes the new RA “will have no effect whatsoever upon the current .Com wholesale price freeze of $7.85 imposed on Verisign”., in its comments, attacked not potential future price increases, but the current price of $7.85, which it characterized as extortionate.
If .com were put out to competitive tender, XYZ would be prepared to reduce the price to $1 per name per year, CEO Daniel Negari wrote, saving .com owners over $850 million a year — more than the GDP of Rwanda.

ICANN should not passively go along with Verisign’s selfish goal of extending its unfair monopoly over the internet’s most popular top-level domain name.

Others in the industry chose to express that the proposed contract does not even attempt to normalize the rules governing .com with the rules almost all other gTLDs must abide by.
Donuts, in its comment, said that the more laissez-faire .com regime actually harms competition, writing:

It is well known that new gTLDs and now many other legacy gTLDs are heavily vested with abuse protections that .COM is not. Thus, smaller, less resource-rich competitors must manage gTLDs laden (appropriately) with additional responsibilities, while Verisign is able to operate its domains unburdened from these safeguards. This incongruence is a precise demonstration of disparate treatment, and one that actually hinders effective competition and ultimately harms consumers.

It points to numerous statistics showing that .com is by far the most-abused TLD in terms of spam, phishing, malware and cybersquatting.
The Business Constituency and Intellectual Property Constituency had similar views about standardizing rules on abuse and such. The IPC comment says:

The continued prevalence of abusive registrations in the world’s largest TLD registry is an ongoing challenge. The terms of the .com registry agreement should reflect that reality, by incorporating the most up-to-date features that will aid in the detection, prevention and remediation of abuses.

The European NGO Alliance for Child Safety Online submitted a comment with a more narrow focus — child abuse material and pornography in general.
Enasco said that 41% of sites containing child abuse material use .com domains and that Verisign should at least have the same regulatory regime as 2012-round gTLDs. It added:

Verisign’s egregious disinterest in or indolence towards tackling these problems hitherto hardly warrants them being rewarded by being allowed to continue the same lamentable

I couldn’t find any comments that were in unqualified support of the .com contract renewal, but the lack of any comments from large sections of the ICANN community may indicate widespread indifference.
The full collection of comments can be found here.

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Comments (8)

  1. Philip Corwin says:

    Thanks for noting ICA’s comments. A few additional observations–
    –We are in agreement that “There’s no credible danger of prices going up before 2018, in other words, and whether they go up after that will be primarily a matter for the US administration.” .Com wholesale pricing is frozen at $7.85 through the end of November 2018 unless Verisign can convince this or the next Administration that it no longer has “market power”. As ICA’s letter makes clear, we don’t think they can demonstrate that today.
    -If ICANN were to put the .Com RA out for competitive rebid the first thing that Verisign would likely do is sue ICANN for breach of contract. That’s because Veirsign’s right of presumptive renewal allows rebid only if it has committed a material breach of the contract and fails to cure that breach even after being notified by ICANN. This issue was extensively debated in 2005-6 after the .Com settlement was announced — and since then, the exact same right of presumptive renewal has become part of the standard new gTLD RA. In contemplation of the potential termination or modification of the Cooperative Agreement between NTIA and Verisign in 2018, ICA’s comment letter calls upon the ICANN community to start discussing a modification of all registry RAs so that competitive rebid would occur if any registry engaged in abusive pricing activities — at a minimum, this should kick in if a registry is found to have violated relevant antitrust/competition laws. Such a provision could further temper future registry pricing decisions.
    –There is a big difference between the BC and IPC (as well as INTA) comments regarding application of the new gTLD rights protection mechanisms to .Com. The BC (Of which ICA is a member) The BC letter says this should be done “if any or all of these aspects of the standard new gTLD registry contract should become Consensus
    Policy as a result of WG recommendations that are subsequently adopted by ICANN’s Board. The BC acknowledges that there is an open legal question whether any of these aspects can be enforced against
    .Com registrants unless they become Consensus Policies or are adopted through a further amendment
    of the .COM registry agreement made”. By contrast, the IPC and INTA comments fail to give any deference to proper policy-making, and you’d never know from their letters that there is an ongoing ICANN working group (co-chaired by the immediate Past President of INTA) looking at the very issue of whether URS and other new gTLD RPMs should become Consensus Policy for legacy gTLDs like .Com. That WG will issue its preliminary report in late 2017, before the current November 2018 renewal date of the .Com RA. So why are trademarkinterests so anxious to have ICANN impose URS on .Com the way it did the same for .Cat, .Pro, and .Travel last year, or to have Verisign acquiesce to it it right now? Simple — if they can have the big policy question of making URS applicable to .Com decided outside the context of the RPM Review WG then they can turn their energy and attention to pushing for other URS changes they are already on record favoring — such as a lowered burden or proof and a domain transfer option — that could convert URS into a $500 vehicle for domain hijacking. ICA for its part will continue to fight for having all these decisions made by the PDP WG, which is where they belong and the only way to assure a balanced outcome.

  2. Michael Palage says:

    I respectfully disagree with your statements about .COM prices NOT being increased before 2018. As I noted in my public comment ( VeriSign currently has the right to increase fees in connection with new Consensus Policies. Has VeriSign stated on the record that it will not seek a price increase in connection with the implementation of thick whois? Implementing this Consensus Policy will not be cheap, I just do not see why VeriSign would do this for free when it has the legal right to ask for an increase in fees.

    • Kevin Murphy says:

      How much would really cost to implement Thick Whois, measured in Verisign-cash-flow-days?

    • Rubens Kuhl says:

      Thick WHOIS can increase VRSN operation costs, but the new RDDS system, depending on how it’s implemented, might shift such costs to a 3rd party like the centralized WHOIS or down to registrars if the conflict with national privacy laws start escalating.
      So, it would be premature to pass those costs down to registrants.

  3. Philip Corwin says:

    You are correct that VeriSign has the right to petition NTIA for an increase in the cap on .Com wholesale prices to reflect the cost of implementing new ICANN Consensus Policy.
    I don’t know how much implementing Thick WHOIS at .Com will cost. But I do know that, spread over a .Com base of 127 million domains (as of 3/31/16), each $million in costs works out to less than a penny per domain.
    So if just a few cents per domain increase could be justified, VeriSign may have concluded that the minor potential increase in income is more than offset by the risk of initiating a public discussion of .Com pricing.
    Best, Philip

    • Michael Palage says:

      I respectfully disagree with you and others that state it will only cost VeriSign pennies to implement thick whois. As someone that has worked with multiple backend providers for over 15 years it is never just a couple of bucks even when it may only involve a few lines of code. Now I will concede that the technical costs associated with thick whois migration will mostly comprise a one time expense of staff, testing , etc. However, there are reoccurring technical expenses in connection with increased bandwidth which must now scale proportionally for DDOS mitigation purposes with the substantially increased data flow. There is then additional storage and escrow costs. Now I am not playing the violin for VeriSign in connection with these costs.
      However, I believe VeriSign can make a multiple million dollar recurring claim regarding the potential legal compliance/liability associated with operating a thick whois especially in light of the new EU Data Privacy Shield.
      To be clear I still remain steadfast in my opinion that VeriSIgn has received special treatment from ICANN over the years. However, I do not think it is fair to discount the potential cost of ALL registries when implementing ICANN consensus policies.
      So the likely result will be Phil and Steve DelBianco testifying before congress, and in that scenario I will likely always bet on Steve and his charts 🙂
      Perhaps and I am wrong but I have a pretty strong gut feel on this one.
      Best regards,

      • Philip Corwin says:

        To be clear I did not say that it could cost Verisign just pennies to implement Thick WHOIS — I said pennies per domain.
        Whatever the cost is, it has to be spread over a .Com domain base that probably exceeds 130 million domains right now. At a penny per domain that adds up to $1.3 million.
        You posit that “VeriSign can make a multiple million dollar recurring claim regarding the potential legal compliance/liability associated with operating a thick whois especially in light of the new EU Data Privacy Shield”. Let’s say you’re right. Let’s even assume that it adds up to $10 million per year.That could be the basis of a request to NTIA to raise the .Com wholesale price by about eight cents per annum.
        If and when Verisign makes such a request we can all judge it on the merits.
        Best, Philip
        PS–Steve has his charts, but my words flow like wine 😉

      • Kevin Murphy says:

        I’d be interested to learn how many Whois lookups happen every day across the whole .com universe.
        A Whois record is only a couple thousand bytes. You’d have to have an awful lot of queries before the bandwidth requirements started becoming material for a company of Verisign’s resources.
        I’m not convinced storage costs would be that big either. We’re talking under a terabyte, aren’t we?

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