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VeriSign-ICANN Proposed Settlement Discussed in Vancouver

Unfortunately I cannot be in Vancouver for the conference. I write this from Cape Town, venue of last years fall ICANN.

I want to disclose a couple of things upfront. Those who know me will know I am nothing if not strongly independent in my views. However disclosure helps those of a more suspicious mind know my associations and if they choose to, take them into account in interpreting my opinions.

1. I sit on the board of SnapNames. I can’t think of any conflict this gives rise to, but in the highly charged atmosphere surrounding this discussion I felt it worth saying.

2. I have, on occasion, consulted for VeriSign as an external product strategist. Most recently I ended such a job in May of 2005. Again I feel no conflict as a result of this but I think it is worth disclosing.

So, here goes. I am somewhat disappointed by the reaction to the proposed settlement. I feel that most of the discussion fails to take into account the actual conditions under which the settlement has been negotiated. Blatant self interest is masquerading as informed comment, most obviously from the Registrar community. Most amazing of all is the failure to grasp the enormity of what the ICANN board and staff has achieved with this proposed settlement, the ramifications of which will be positive for all ICANN constituencies for many years ahead.

Here are the top ten points I think are pertinent to an understanding of the settlement and its context:

1. ICANN has succeeded in changing the competitive landscape by introduction of more TLDs

There are now many more TLDs than when ICANN was formed. The concept of a monopoly in the contract to operate a single TLD makes absolutely no sense. There is no monopoly any longer.

2. Growth of ccTLDs has made this even more so

Today, one in every two new domain names is a ccTLD second or third level domain. This is a phenomenon that has been growing over the last several years. This process also makes the concept of a single TLD contract giving it’s owner monopoly rights. Ask CNNIC if it feels VeriSign has a strong market position in China. Same in the UK, Germany, Taiwan, Japan, Korea, indeed any country with a strong ccTLD operation.

3. Sale of NSI registrar has the same effect

At ICANN’s formation VeriSign (then NSI) ran the sole TLD’s and had the largest Registrar. Today, .com represents a far smaller proportion of the worlds domain names and VeriSign owns no registrar. Clearly VeriSign is a diminished animal as a result of the three new developments above.

4. Therefore ICANN’s role in aiding competition has been accomplished.

Insofar as ICANN’s remit included the job of introducing competition into the domain name industry, it’s goals have been more than fully achieved. Today, as never before, consumers have plenty of choice in deciding which domains to purchase and whom to purchase them through.

5. ICANN was never, and is not now a regulator. It is a coordinating body.

ICANN was never intended to be a regulator along the lines of an FTC or and FCC. It is a coordinating body responsible for policy matters covering the security and stability of the Internet, and even then, only in relation to Names and Numbers. It’s remit of allowing competition to flourish was a single exception to that, and could even be interpreted as being part of guaranteeing stability and security. Now that this goal has been achieved, the regulatory aspects of the Registry agreements should be removed.

6. The market should now be allowed to determine business related things like pricing and product development (so long as stability and security are not compromised).

Price controls, product controls and similar instruments should be passed over to the market to regulate. Any registry, even the ,com and ,net registries, will have to take market realities into account before introducing new products/services or changing prices. And as the industry is 100% channel based, they will also have to take into account the views of the Channel (registrars and resellers). ICANN should not seek to play the role of the market. It should protect security and stability.

7. The ICANN-VeriSign agreement should be seen as the first in a whole series of steps to clarify ICANN’s role as a coordinator and not a regulator. Allowing the market to determine demand for TLDs and pricing for them is key here.

Now that ICANN has begun to focus on policy developments that will allow the market to determine key aspects of registry pricing and product development we should expect to see more innovation. For example it seems logical that TLD’s should be able to come into existence simply because a party capable of running one desires to bring it into being. The market and the ability to run a TLD should e the only obstacles. ICANN’s cumbersome and lengthy process of filtering really should be reduced to a role of determining ability to run a registry and any other stability and security issues. New products from Registries should be treated in the same way. Registrars should be encouraged to use their market power either individually or collectively to encourage their suppliers (Registries) to take into account their needs. Turning to Daddy (ICANN) to regulate should be strongly discouraged.

8. Registrars will also benefit from this by market growth (a bigger pie).

With these developments the market for the domain name industry should grow larger (primary domain name sales, secondary market names, new products and services) will all be introduced to meet market demand. As the pie grows all layers of the industry will benefit.

9. Users will not suffer if pricing and product development flow from market requirements and competition. Prices can only rise above customers’ willingness to pay if users have no choice. This patently isn’t so.

Users will not suffer if the industry focuses on products and services that meet an identified need. Choice will grow and users will benefit. If prices rise it will be because the value of the product justifies it’s price.

10. Paul Twomey and Vint Cerf plus their colleagues deserve much credit for initiating this process of creating ICANN’s next stage of development

I believe that the ICANN staff, led by Paul Twomey and the board, led by Vint Cerf, have done an amazing job of recognizing the need for ICANN to enter a new era or market driven growth in the domain name industry. Despite the heat there is primarily light in the proposed settlement. The industry should congratulate them and now move on to execute their individual strategies based on this new reality. There are many innovations to come and those who focus on the past are likely to be its victim. Post-settlement the future looks bright for those who grasp its potential.

By Keith Teare, Principal

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Dave Zan  –  Dec 1, 2005 7:29 AM

Correct me if I’m wrong, but VeriSign’s contract to manage the .com Registry was extended up to 2012, isn’t it? Call me naive, but why was it extended whereas they were “made” to bid for .net?

Keith Teare  –  Dec 1, 2005 2:16 PM

I believe the world should get over the fact that VeriSign runs .com; probably forever and certainly for a long time to come. Somebody has to run it, and whoever does will have an awesome business. Given that, and the fact that VeriSign seems to do a great job, we should all move on to think about how we might extend the naming system to provide more useful services to customers. In-fighting with no chance of success is wasteful of everybody’s time and energy.

On your point, VeriSign already had an implied extension in their last ICANN contract. This is simply carrying through what was already agreed.


The Famous Brett Watson  –  Dec 2, 2005 3:08 AM

I have a problem with all this talk of competition and letting the market sort it out. The problem is that domain name registries only compete with each other in a limited sense, while in another sense they are monopolies.

Sure, when one chooses a name to register, there is a certain degree of competition between registries as to which name to register. Should you go for the well-recognised “.com”, or a country-specific code, the less reputable “.biz”, or what? Some of this decision will depend on what’s still available in each domain. There’s a competitive element there, but not all domains are of equal appeal: few businesses will want to represent themselves as a “.org”. The semantics of domain names makes the field distinctly uneven.

When it comes to domain name renewals, however, it’s a totally different story. Small wonder that VeriSign wants “.com” so much: not only does it have the largest mind-share, it also has by far the largest number of existing registrations—a large captive audience out of which they can wring ever-increasing renewal fees indefinitely. An existing registrant doesn’t have as much freedom to switch domains as a new registrant has to choose between them: changing domains breaks bookmarks and URLs, and results in massive loss of good reputation through Google’s PageRank(TM) and similar mechanisms.

In short, if a domain registrant builds value into a domain name through prudent management of the properties associated with that domain, the domain name registry is in a position to exploit that value through increasing renewal fees. Or, to put it another way, the only market in which domain name registrations are truly competitive is one in which domain names have no intrinsic semantic value, and every registrant treats every domain as a throw-away. The real world is nothing like this.

There’s been some talk of ICANN’s status as a non-profit. It seems to me that the registries should be the non-profit organisations: financially open and accountable, and not siphoning off money into private hands. The for-profit side of things can happen at the registrar level, where genuine competition is possible.

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