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Advocating for Domain Name Registry-Registrar Separation

.ORG, The Public Interest Registry has, since its inception, advocated for policies designed to reflect the public interest, namely of fair and open competition that benefits not only .ORG, but all Internet users. ICANN is now faced with a critically important decision on whether to remove the trusted and proven safeguards that prevent domain name registrars from owning and operating domain name registries. Because of its concern for end users, support for the success for new Top-Level Domains (TLDs), and strong belief in the benefits of fair competition, .ORG vigorously opposes removing these critical safeguards and strongly supports registry-registrar separation.

PIR is very concerned that ICANN intends to reverse an established, and successful, policy of requiring a separation of registry and registrars. The impact of this decision will be significant harm to most new generic Top-Level Domains (gTLD) operators, brand owners, and end users. .ORG is not alone in this concern. PIR is joined in this concern by Afilias Limited, NeuStar Inc., the ICANN Business Constituency, and the International Trademark Association. They have all issued strong statements of concern that allowing cross ownership will harm competition and the end user community.

Many abuses may be expected if the separation safeguards are removed. There is an inherent conflict of interest when any company functions as both registry and registrar for a TLD. It could effectively subsidize its registrar operations with profits generated by its registry operations, an advantage other competing registrars could not enjoy. In the short-term this might lead to reduced prices, but it also leads to predatory pricing practices, and is almost always anti-competitive as it makes it difficult for non-affiliated registrars to compete with affiliated registrars on the basis of price. These and other anti-competitive scenarios ultimately lead to less competition, narrower choices and higher prices for consumers.

Another potential abuse stems from the availability of information generated by registry operations to benefit operations of an affiliated (or co-owned) registrar. Non-affiliated registrars selling registrations in the TLD will have to provide registrant information to the vertically integrated registry. If non-affiliated registrars do not want to hand over this customer data, they will refrain from selling registrations in the TLD and there will be no competitive market that would result from broad distribution. If non-affiliated registrars do hand over the customer data, they have no assurance that the integrated company will not take advantage of the data for competitive purposes. In either case, the end result is anti-competitive.

These are just a sampling of the types of abuses and threats to competition that are likely. PIR believes that removal of the restrictions on cross ownership abrogates and ignores a decade of proven success and disregards the interests of consumers and brand owners alike.

What success you ask? Since 1999, when Network Solutions, Inc. (NSI) and ICANN agreed on the separation of NSI’s combined registry and registrar functions, the market as grown from about 5 million to over 100 million domain names in the generic TLDs. The registrar companies grew from a solitary one to over 900 (500 active) strong, and retail prices of registrations plummeted from $35.00 per year to an average between $10.00 and $12.00 per year.

Given the significant likelihood for harm to the proposed new gTLD registries resulting from anti-competitive practices, PIR supports maintaining and strengthening the restrictions on cross ownership of registries and registrars. The current separation safeguards have worked because there have been no new gTLDs, but there are loopholes that could be exploited when the procedures for creating new gTLDs are implemented. In order to prevent the exploitation of these loopholes in, the final cross ownership policy must be accompanied by: (i) precise definitions of what constitutes cross-ownership (e.g., affiliation and control issues) and (ii) extension of the prohibition against cross-ownership to encompass not only Registry Operators, but also providers of Registry Services (as those terms are defined in the proposed Base Agreement for new registries). These steps will ensure that companies do not circumvent the intent of the cross-ownership restrictions by establishing creative groupings of related companies. PIR also recognizes that there are exceptions. For example in cases of a community based TLD with a limited number of subscribers, the registry might find it hard to gain distribution channels and the restrictions could be relaxed. We have carved out language that caters to their distribution needs without creating gaping loopholes.

On Monday June 22nd ICANN will be presenting a panel presentation in Sydney on cross ownership. The selection of this panel was not transparent. Despite repeated requests from PIR and others, ICANN has failed to disclose critical information related to this panel and the history of ICANN’s ownership proposals. For example, ICANN was asked for a copy of the statement of work issued for the CRAI report, as well as copies of the documentation or instructions given to panel members. The hasty set up of the panel demonstrates a lack of transparency and community inclusion by ICANN in a critical decision.

Those who are concerned about the issues raised in this blog, and who support fair competition are urged to attend this panel in person or remotely and voice their concerns. Everyone should demand that these issues be reconsidered by the ICANN board in a transparent forum. Individuals are also urged to log onto: http://www.registryregistrarseparation.org for more information and to express support for vertical separation.

By Alexa Raad

Architelos provides consulting and managed services for clients applying for new top-level domains, ranging from new TLD application support to launch and turnkey front-end management of a new TLD. She can be reached directly at [email protected].

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Consumer Interests should come first George Kirikos  –  Jun 21, 2009 7:03 PM

It’s clear the incumbent registry operators want to maintain the separation in order to reduce the number of entities who are able to put forth their own new TLD applications (i.e. to prevent eNom, Pool, NSI, GoDaddy and others from getting TLDs). In a real sense, both sides are anti-consumer, and vertical separation would not matter as long as the TLDs are being tendered for operation to the lowest cost bidder (as we’ve long advocated for .com, and all other gTLDs) for fixed periods. Both sides are just jockeying on how to split up the abusive profits from monopolistic TLDs that are “owned” by a registry. Both sides have no interest in SERVING the public, by competing for fixed-length contracts where consumer benefit is maximized through the lowest price to all consumers, as per comments by ourselves, and other parties including the DOC/NTIA and DOJ.

The solution is to reframe the issue from the point of view of maximizing consumer benefits through tenders, and ignoring both the registrars and the registries. Indeed, reframed in this manner, the strongest case can be made that there should be no new gTLDs, at least until such time as a proper economic study determines that they would add value for consumers that exceed the negative externalities.

There’s a certain deja vu when Ms. Raad writes:

The selection of this panel was not transparent. Despite repeated requests from PIR and others, ICANN has failed to disclose critical information related to this panel and the history of ICANN’s ownership proposals. For example, ICANN was asked for a copy of the statement of work issued for the CRAI report, as well as copies of the documentation or instructions given to panel members. The hasty set up of the panel demonstrates a lack of transparency and community inclusion by ICANN in a critical decision.

Where was she when the IRT was created? Or, even when the guidebooks were being created by ICANN? Would she go on the record supporting the idea that ICANN is making policy decisions via the guidebooks, policies which truly should be going through the GNSO? Does she agree that ICANN staff have intentionally been misusing the word “implementation” in order to avoid going through the GNSO for new policies?

Why not just allow anyone to bring Devdas Bhagat  –  Jun 22, 2009 5:34 AM

Why not just allow anyone to bring up a new TLD on a first-come-first-serve basis, as long as they can provide the infrastructure for it? A domain is just a namespace, and trademark concerns need to be restricted to ccTLDs only. That would benefit consumers as much.

The reasoning doesn't add up Richard J Tindal  –  Jun 23, 2009 9:26 AM

If you can sift through the dire warnings of abuse, threat and harm that registry—registrar separation apparently prevent the posting actually cites just two cases:  (1) price increases; and (2) access to data from competing registrars.

What?    Neither of these arguments make sense.  New gTLD registries, just like many existing gTLD registries, can charge what they want for their domains.  They can do this whether there is registry-registrar separation or not.  (As an aside - these registries won’t engage in ‘predatory pricing’ because if they do so their customers will abandon them for other TLDs).

The second concern is access to data from other registrars.  Again, this is not logical.  All the data that comes to a registry from a registrar is publicly available information on the WhoIs.  Everyone gets to see it.  Registry—registrar separation has no bearing on this issue.

In fact, the only time registry—registrar separation is beneficial to consumers is when there is a price-capped registry with dominant market power, and there is currently only one gTLD registry like that.

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