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Troubling Efforts to Distort and Undermine the Multistakeholder Process

ICANN’s request for comment on amending the .com registry agreement to restore Verisign’s pre-2012 pricing flexibility ended last Friday and, with 8,998 responses submitted by stakeholders, may have been a multistakeholder version of the St. Valentine’s Day Massacre. Public interest in .com pricing is understandably high but the sheer volume of responses—nearly three times the number of comments submitted this summer on deregulating .org pricing—also suggests a show of force from stakeholders still outraged by ICANN’s decision to deregulate .org pricing despite an overwhelming 98.1% of stakeholder comments opposing the move.

Stakeholders became further inflamed when, shortly after .org pricing was deregulated, it was announced that Public Interest Registry (PIR), which operates the .org registry, was being sold to private equity interests in a complex deal involving several ICANN insiders and worth more than a billion dollars. The resulting controversy is ongoing, and California’s Attorney General has launched an investigation.

Given ICANN’s disregard for their views on .org, stakeholders are skeptical, if not cynical, about their ability to influence decisions on .com pricing—particularly because of the quid pro quo where ICANN will be paid $20 million over five years by Verisign after approving .com price increases. An unscientific analysis of responses reveals stakeholder sentiment to be a mix of outrage and frustration along with pessimism and resignation about a process that is seen as rigged. If negative sentiment persists or worsens, then it may lead to a crisis of confidence in ICANN. This may bring into question the integrity and legitimacy of private sector-led multistakeholder Internet governance such that momentum is added to efforts led by Russia and China to establish authoritarian and censored versions of the Internet.

Interestingly, Verisign submitted one of the last responses, an unsigned letter to ICANN with the subject “Troubling Efforts to Distort and Undermine The Multistakeholder Process.” The letter is rather bombastic, accusatory, and mostly wrong. But it also offers a rare glimpse into the mindset of the Internet’s dominant registry operator that bears scrutiny.

The letter opens by asserting the belief that Amendment 3’s changes are “consistent with those approved by the United States Government.” However, this is not germane—the United States Government is not a party to this Amendment or to the .com Registry Agreement itself. Verisign and the U.S. Government, through the National Telecommunications and Information Administration (NTIA) maintain a separate but related Cooperative Agreement and which was modified in November 2018 when Verisign and NTIA agreed to Amendment 35 which states, in part, that:

Without further approval by the Department, at any time following the Effective Date of this Amendment 35, Verisign and ICANN may agree to amend Section 7.3(d)(i) (Maximum Price) of the .com Registry Agreement to permit Verisign in each of the last four years of every six year period, beginning two years from the Effective Date of this Amendment 35 (i.e., on or after the anniversary of the Effective Date of this Amendment 35 in 2020- 2023, 2026-2029, and so on) to increase the Maximum Price charged by Verisign for each yearly registration or renewal of a .com domain name up to seven percent over the highest Maximum Price charged in the previous calendar year. (emphasis added)

Rather than requiring price increases, NTIA merely says that Verisign and ICANN “may agree” to price increases. If NTIA had intended for Amendment 35 to require price increases, then this provision would have said that ICANN and Verisign “shall agree” and more than likely would have included a deadline for doing so. Amendment 35 is NTIA acting, on behalf of the U.S. Government, to regulate wholesale .com pricing by setting out and prescriptively describing what may be—not shall be—agreed upon by Verisign and ICANN for purposes of Maximum Price of .com registrations.

Reference is often made to an agreement between Verisign and ICANN that is part of a 2016 extension of the .com Registry Agreement (RA) and which calls for ICANN and Verisign to “flow through” to the RA any relevant changes that are made to the Cooperative Agreement. Regulating pricing is a messy job that ICANN has shown no real aptitude or interest for. But NTIA has delegated to ICANN an important and potent tool that offers new leverage for helping to restore balance to its relationship with Verisign. “Flow through” doesn’t mean “rubber stamp” and ICANN should insist that implementation of NTIA-regulated pricing flexibility be predicated upon an assessment of benefit to the public interest—which is different from benefit of $20 million being paid to ICANN. This would be a deliberate act of responsible DNS stewardship—and would also demonstrate that ICANN has a rudimentary grasp of Negotiation 101—that doesn’t require ICANN to regulate pricing. The most obvious starting point for any public interest review is with the expectations communicated in NTIA’s announcement of Amendment 35, in November 2018, which stated:

Amendment 35 confirms that Verisign will operate the .com registry in a content neutral manner with a commitment to participate in ICANN processes. To that end, NTIA looks forward to working with Verisign and other ICANN stakeholders in the coming year on trusted notifier programs to provide transparency and accountability in the .com top level domain. (emphasis added)

What benefit can there be to the public interest by serving the pricing flexibility “dessert” before the transparency and accountability “peas and carrots” have been cleared from the plate?

The next few sentences of Verisign’s letter allege that “a small but vocal group” with “undisclosed pecuniary interests” are attempting to distort the truth, hijack the process, and undermine ICANN’s legitimacy. It also makes gratuitous attacks on two registrars, Namecheap and Dynadot, as being aligned with the speculation business and fomenting revolution with campaign-style tactics to flood ICANN with letters.

Attacking registrars for being aligned with the speculation business isn’t new and results from a disconnect between Verisign and its registrar sales channel that’s rooted in there being no private or public interest that benefits from higher .com pricing except Verisign. Another example is when the company celebrated the day after Amendment 35 was announced by issuing a bizarre blog that attacked two registrars for, among other things, being aligned with speculative domain name investors. Now, as then, it seems strange for any company to publicly bully two significant channel sales partners; but why is the .com registry operator attacking registrars for aligning with registrants who acquire and hold large portfolios of .com domain names?

First, Verisign is scapegoating when it selectively characterizes registrants of large domain name portfolios as being shadowy speculators illicitly profiting from ill-gotten domain names instead of investors engaged in the age-old activity of buying low and selling high. This characterization also excludes brands, media companies, and large conglomerates, among others, that maintain portfolios of hundreds of thousands and even millions of domain names (i.e. Verizon, 21st Century Fox, Unilever, etc.).

The reality is that the demographic presented opportunistically as the avatar of domain name registrant purity—i.e. the business, organization, individual, or cause that registers a domain name for building an online presence—is in the minority. A study conducted last year by the Singapore Data Company concluded that this demographic comprised about 31% of the .com namespace, and the other 69% of domain names are parked, serving ads, or porn.

Two other factors are relevant here as well. First, most registrars don’t make the bulk of their revenue from bulk domain name sales. Instead, they sell domain name registrations at a small margin, at cost, or as a loss leader and bundled with services, such as web design, hosting, etc. Secondly, domain investing has evolved since the early days when “domainers” included a lot of arms merchants, porn kings, and other wildcatters who were “cleaning” money. Today, domain investors include all sorts of people seeking to earn financial returns and who are driven by diverse profit motives, including professional speculators, working-people mistrustful of Wall Street, and domain developers that offer turnkey branded online businesses built on domain names.

Amidst this churn of commerce is a monopoly with one of the largest gross profit margins of any company ever and yet, far from being contented, covets more. People covet what they envy others having, and Verisign’s own words are forthright and revealing. The unsigned letter leans heavily on detailed and suggestive insinuations to try conjuring jabberwockies of shadowy speculators that “revel in the exorbitant prices that they themselves set and obtained for .com domain names.” But there’s nothing wrong with setting a price, exorbitant or not, that can be obtained from a free market—that’s the basis for capitalism.

This statement suggests that Verisign either fundamentally misunderstands or disagrees with its role in the DNS and believes that it’s been shortchanged somehow. Instead of seeing the billions of dollars generated by more than 130 million domain name registrations, Verisign is blinded by envy at the relative pocket change being earned by investors on the secondary market. Envy deceives them into seeing “deceptive campaigns” filled with “misleading omissions” being driven by shadowy speculators with “undisclosed pecuniary interests” where there are, in reality, only grassroots efforts to drive public awareness of and engagement on an important public interest issue. Perhaps it is also envy that causes them to forget that not everybody can afford to put ICANN’s constituency chairs and other influencers on retainer.

This letter—by coming late in the process when resounding opposition to price increases was already clear and with no executive willing to sign their name to it—should be seen for what it actually is—a hegemonic bellowing of frustration and rage.

That’s all.

By Greg Thomas, Founder of DNSDecrypt

Greg Thomas is founder of DNSDecrypt and author of How to Save the Internet in Three Simple Steps: The Netizen’s Guide to Reboot the Root. The views expressed in this article are solely those of Greg Thomas and and are not made on behalf of or for any other individual or organization.

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