In a joint document, Afilias, NeuStar, and PIR discuss the salient issues facing the ICANN Board regarding a proposal for registry/registrar vertical integration in the newTLD round.  The paper identifies some of the risks associated with the ICANN Staff proposal while at the same time proposing a path forward that does not jeopardize any further delay in the new generic Top-Level Domain (gTLD) launch process. A summary of the points raised includes:

• Since its inception, it was clear that the vertical separation policy was serving consumer protection values that included—but went far beyond—competition.
• Eliminating the vertical separation restraints under the current top down process could result in significant delay in the new TLD round.
• Studies to date have not fully addressed how such a change would benefit consumers and registrants, nor have they included an analysis of the potential harm to domain name registrants of permitting registrars to operate as new gTLD registries while selling in their own string.
• The vertically integrated registry/registrar will create an environment that is ripe for “insider trading” opportunities using data that is commercially sensitive and available uniquely to the registry operator.
• Permitting vertically integrated registry/registrar operations will eliminate certain current penalties that discourage abusive practices.
• Registrars are divided. “Right now, our industry has conflicts of interest and it is putting personal short-term gain ahead of long term commercial interests,’ says Joe White at the Gandi registrar.
• Since registry service providers or “backend” providers offer functionally equivalent services as registry operators, the application of existing policy to registry services providers is appropriate and necessary to effectuate the longstanding pro-competition and end user protection goals of the policy.
• ICANN need not delay the new TLD round on the basis of the vertical separation issue. ICANN can proceed by continuing the policy of separation for registry operators and registry service providers in the new round while the community, if necessary, launches a PDP that can appropriately address the fundamental economic and registrant impact issues on a parallel track.

The longstanding vertical separation policy ensures important protections for registrants in a market that will soon include hundreds of newTLD choices. PIR, Neustar and Afilias welcome new competition in the TLD registry market by registrars as long as they are restrained from selling their own TLD and we support the RyC supermajority position on the CRAI Report. The current restraint against a registry distributing its own TLD should be maintained to avoid creating incentives to abuse registry data and to protect registrants and other registrars from unfair gaming of the registration system.