[Comments-com-amendment-3-03jan20] Comment in opposition to Proposed Amendment 3 to the .COM Registry Agreement

[pub 144]

To Whom it May Concern,

I am a dot com domain registrant and I am deeply disappointed to hear that ICANN is proposing a new contract amendment with Verisign, the operator of the dot com registry that, among other things, will impose a string of annual price increases on domain registrants. Unfortunately, almost everything you hear these days coming out of ICANN is negative for domain registrants and positive for domain registries. Registrants, the most important part of the domain name ecosystem, are the least valued, and their pocketbooks are treated as a playground for powerful companies such as Verisign.

You hear people say, “well, it’s only a dollar a year. It doesn’t really make a difference. I can afford it.” But I believe it’s important to see the forest for the trees. When viewed in the aggregate, this proposed price increase does in fact make a difference when you consider that it will have a negative financial impact on over a hundred million dot com registrants worldwide. Beginning in the first year, dot com registrants will lose approximately $100 million due to this price increase, By the end of the contract, 2024, the annual loss to consumers will be approximately $300 million. By any standards, that is a massive giveaway to the operator of the dot com registry that comes straight from the pocketbooks of mom and pops, small businesses, entrepreneurs, and other individuals around the world.

ICANN has agreed to grant Verisign the right to seek not just one price hikes, but a string of four annual price hikes up to 7% a year which will, on a cumulative basis, significantly increase the price of dot com domains by the end of the contract term. Verisign is seeking to implement the maximum 7% increase allowed under the proposed contract. That 7% price increase is well above any common measure of inflation, which currently runs around 2% annually. How can a price increase of 7% possibly be justified? Further, the cost to operate domain registry services on a per domain basis continues to decrease. Thus, ICANN should be seeking price decreases for domain registrants rather than price increases. Let alone price increases that are 300% above the general rate of inflation.

The unchallenged position of Verisign as the sole operator and perpetual incumbent of the global behemoth dot com domain extension with creates an unhealthy imbalance of power in the domain name system that ICANN is ill-equipped to manage. Registry operators such as Verisign are contracted parties that operate according to ICANN’s terms, not the other way around. Yet, the proposed contract perpetuates this imbalance and grants Verisign even more economic profits and corporate power. (It should be noted that my comments are not directed at Verisign in particular. Indeed, any company that was granted the unchallenged right to oversee the dot com registry and virtually dictate the terms of its contract would assume such outsized financial and political power. ICANN is solely responsible for creating and perpetuating the existence of such as Frankenstein.

ICANN states that it is not a price regulator. However, the DOJ and DOC are not interested for political purposes in fulfilling such a role, so then who is in charge of protecting global consumers from abuses of pricing power in the domain name system? It seems the registries are in control and imposing their wishes upon consumers through ICANN’s policymaking processes and domain registrants have no one looking out for them. ICANN seems content to pass contracts which bestow upon registry operators uncontested price increases and even removals of all price protections for consumers, and if registrants don’t like it, they are forced to pursue costly private litigation to prevent the price hikes from being imposed upon them. That is untenable and unfair.

As ICANN must know, even at the $7.85 annual wholesale fees Verisign has been limited to since 2012, Verisign Corporation has already grown into a financial behemoth. It operates with unrivaled levels of profitability by commonly-accepted financial measures such as operating margins and EBITDA. As a result of its no-bid, perpetual right to operate the dot com registry, Verisign operates as a massive cash cow and pockets virtually all of the income from charged for dot com domain registrations. Each year, Verisign has more than $600 million in profits that it has no use for and does nothing with but buy back its own stock. This is money that comes straight from the bank accounts of domain registrants. And now ICANN is working with Verisign to implement price hikes that by 2024 will add an additional $300 million a year to the enormous annual windfall that Verisign already enjoys.

ICANN must be aware that that money is coming from the pockets of businesses and individuals, akin to a massive private tax imposed upon registrants. Those millions of dollars that will be going to one large private company at ICANN’s behest are being sucked out of communities and out of households which have far greater need and purpose for the money than an already fatly rich company does. Worse, many dot com registrants come from poorer parts of the world, where domain registrations are a luxury, and ICANN is making the promise of an opportunity to escape poverty harder to achieve by raising prices on these less fortunate registrants.

ICANN has stated that the comments period is an important part of enforcing the multi-stakeholder model. However, we have seen ICANN attempt to disregard thousands of comments opposing price increases and removal of price caps on the dot org extension. ICANN’s own ombudsman attempted to rule out thousands of comments opposed to the dot org contract amendment on the grounds that they were engineered by one trade association.

ICANN, here is the hypocrisy of the comments period and of what happened in the dot org comments period and what is happening in the dot com comments period now: ICANN has no requirement incumbent upon registrars, and itself makes no effort whatsoever, to notify domain registrants that a comment period has been opened during which registrants can voice their opinion against such price increases.

So, you have a situation where just a tiny percentage of the tens or hundreds of millions of impacted registrants are even aware that such a price hike is being proposed. How can they possibly let ICANN know that they oppose the increases if they are not aware of them? If all those registrants were notified and urged to comment, ICANN would receive hundreds of thousands or even millions of comments against the increases.

Yet, it seems ICANN and its registry partners seem to prefer the status quo and operating with little public awareness of these changes that negatively impact the average registrant. And when an independent entity attempts to expend its own resources to help make registrants aware of the comments period and encourage them to submit a comment for or against the contract changes, instead of thanking that entity for its help in engaging the public in the multi-stakeholder model ICANN supposedly supports, ICANN goes out of its way to criticize that entity as a “self-interested” party and does what it can to delegitimize all comments that came from its laborious efforts to raise public awareness. How can anyone but conclude that ICANN and the powerful registries seem to prefer operating in the dark, and public engagement in the policymaking process is in fact not valued or even wanted by ICANN or the registries.

It is worth noting that in winning the auction to operate the .web domain extension several years ago, Verisign - disguising its identity through the use of a stalking horse bidder -, opted against an auction format that would split the proceeds amongst the many other bidders competing for the .web extension, as was commonplace in other auctions with multiple bidders during the rollout of ICANN’s new gtld program. This maneuver had the effect of directing the entirety of Verisign’s $135 million bid solely to ICANN, rather than being shared amongst the losing bidders. Hence, Verisign paid $135 million AND secured the single domain extension that was widely agreed to present the greatest competitive challenge to Verisign’s dot com extension. That series of events prompted a Department of Justice investigation, (which in fairness was closed without remedial action).

Nevertheless, the .web incident is important because many have noted that as part of granting the proposed contract which grants highly lucrative financial gains to Verisign, ICANN has also arranged a $20 million payment for itself from Verisign (ostensibly to promote efforts to maintain security of the domain name system). While it is indeed circumstantial, I would propose that readers of this comment consider the $135 million payment that Verisign made to ICANN as part of the atypical .web auction process in the context of this proposed lucrative contract renewal, in addition the $20 million that Verisign is paying to ICANN in conjunction with the new contract.

ICANN must be blind not to see how this is being perceived by the general public and the media as a quid pro quo or payoff for approving the contract with price hikes. This may or may not be true, but perceptions matter. ICANN has created the perception that it is incapable of fair policymaking, that it is in the service of powerful companies it is supposed to oversee, that it favors those powerful few companies over the many million of registrants who do not have the same financial clout and small army of consultants and lobbyists who work the insides of ICANN and Washington to promote their own agenda the way those companies do. Despite the appearance of soliciting community input through comments periods, ICANN really has no true mechanism to protect the interests of registrants and, based on its actions, seems to be okay with that. That is deeply disappointing. With such actions as approving the price hikes contained in the proposed contract amendment, ICANN seriously risks losing its legitimacy as an impartial governing body. Domain name registrants need a strong, fair, and trustworthy governing body that looks out for the rights of registrants too.

I oppose the proposed contract amendment and call for ICANN to amend it to better protect consumers from unwarranted price hikes. ICANAN can do this by eliminating the price increases it has granted as part of the contract, or reducing the size of annual percentage increases on dot com fees granted therein.

I also propose that, in return for maintaining the perpetual, no-bid contract to operate the dot com extension, ICANN should consider requiring Verisign to relinquish the right to operate the dot net and dot web extensions in an effort to promote vibrant competition among domain registries and prevent concentration of power in the domain name system.

Further, ICANN should make all efforts to put the contract to operate the dot com registry out to bid and let the market decide what the wholesale cost of a dot com should be based on those bids. Open bidding to operate the dot com registry would undoubtedly result in LOWER prices for consumers, not the ever-increasing annual registration fees that registrants are forced to endure under this perpetual, no bid contract ICANN has bestowed upon Verisign.

Respectfully Submitted,

Matthew Klein

-------------- next part --------------
An HTML attachment was scrubbed...
URL: <https://mm.icann.org/pipermail/comments-com-amendment-3-03jan20/attachments/20200213/76916666/attachment.html>