[Comments-net-renewal-20apr17] Against Proposed Renewal of the six-year .NET registry agreement between ICANN and Verisign

[Bruce Henry Lambert]

Against Proposed Renewal of the six-year .NET registry agreement between
ICANN and Verisign
Expected monopoly collection of revenues: One Billion US Dollars approx.
($1,000,000,000.00)

Regarding proposed .NET registry renewal posted by ICANN at:
https://www.icann.org/public-comments/net-renewal-2017-04-20-en

Summary Position of this Comment: STRONG OPPOSITION

It is irregular to award a huge monopoly contract with no open tender.
Presumptive renewal of a contract this size is outside standard business
practices, and reflects inadequate / substandard oversight, disregarding
public interest. Opening this contract to competition will help lower user
costs, largely eliminate unjustified windfall profits, and greatly reduce
the appearance of potential corruption.

The reasoning for many changes in this contract is said to be "Updated for
consistency with registry agreements for other gTLDs." But we understand
the .NET Registry Monopoly is fundamentally unlike other registry
agreements with the major exception of the .COM Registry Monopoly (also
peremptorily arrogated to Verisign). Other commercial gTLDs passed through
a competitive proposal & tendering process that both Verisign and ICANN
would hereby dodge, giving the appearance of inappropriate collusion. This
proposed renewal and its terms promise to harm consumers.

As of today (late May, 2017), the domain name base for .net is
approximately 15,000,000 domains.

Considering approximately 15 million annual .NET registrations, and a
contract term of six years, with Registry Operator service fee of US$8.20
and authorized increases of 10% at start of each calendar year
from July 2017: $8.20/yr  (assuming half year, 7.5m domains) Revenues:
US$61,500,000
from Jan 2018: $9.02/yr  (15m domains)  Revenues:  US$135,300,000
from Jan 2019: $9.92/yr  (15m domains)  Revenues:  US$148,800,000
from Jan 2020: $10.91/yr  (15m domains)  Revenues:  US$163,650,000
from Jan 2021: $12.00/yr  (15m domains)  Revenues:  US$180,000,000
from Jan 2022: $13.20/yr  (15m domains)  Revenues:  US$198,000,000
from Jan 2023: $14.52/yr through June 30, 2023  (assuming half year, 7.5m
domains) Revenues:  US$108,900,000

So this non-competitive ("sweetheart") agreement will generate total
expected revenues of about One Billion US Dollars (US$996,150,000 without
market growth). This situation demands competitive tendering.

The reasoning detailed above does not reflect immoderate or bad behavior by
Verisign, a corporation richly rewarded with repeat non-bid contracts as
the "authoritative directory" and "exclusive registry" of all .NET and .COM
domain names.

During the six-year period of this agreement however, in my opinion,
Verisign damaged the .NET and .COM brands, eroding ownership rights with
poorly managed operations regarding transliterations of .NET and .COM into
multiple languages. ICANN was involved in this process.

In 2012 Verisign applied to ICANN, the Internet Corporation for Assigned
Names and Numbers, for so-called gTLD internationalized domain name
transliterations of .com and .net in assorted major languages. There's been
many billions of dollars invested in existing .com and .net domains, so
Verisign and ICANN needed to avoid controversy and the threat this process
would erode ownership rights or seriously confuse the market.

International domain names (IDN) can be convenient for end-users typically
operating in non-English scripts such as Cyrillic, Chinese, Arabic or
Hindi, relieving the need to toggle between different text-input keyboards.
ICANN oversaw expansion of the gTLD system. ICANN accepted Verisign's
applications for transliterations of .com and .net in assorted major
languages although Verisign had only temporary time-limited contracts as
the "authoritative directory" and "exclusive registry" of all .NET and .COM
domain names.

Verisign's policy on IDN.IDN implementation, and the rights protection
format they proposed to follow, was very explicit, with a key objective:
"Avoid costs to consumers and businesses from purely defensive
registrations in the new gTLDs."  They asserted: "A registrant in one of
the IDN TLDs, or a registrant of an IDN.com or IDN.net, will have the sole
right, but not be required to register the exact same second level name
across all or any of our IDN TLDs, including the .com or .net TLDs as
applicable."

With this widely publicized explanation, Verisign avoided opposition by
.net and .com owners against Verisign's planned offerings. Some of us
registered IDN.net and IDN.com domains expecting our positions would be
securely protected by Verisign.

Instead, Verisign launched the first of the transliterations (also termed
"aliasing"), largely unconnected to existing .com ownership, although a
Priority Access Program allowed existing registrants early purchase of
Verisign's transliteration, typically at premium pricing. It is unclear if
changes in plan were initiated by Verisign or ICANN, but both now squeeze
added revenues from resulting format changes. Ultimately, if I owned
lawyer.com -- another person might buy lawyer.コム (or lawyer .ком with
Japanese or Russian ".com" and pronounced nearly identically). Defensive
registrations are costly, with both Verisign & ICANN reaping benefits from
what now appears a collusive relationship undercutting ownership rights in
.NET and .COM domain names.

This was wholly different from Verisign's long-time presentation: (Verisign
quoted below until 'end quote' mention)  "In 2012, Verisign applied to
operate registries for eight transliterations of .COM and three of .NET (to
the right of the dot) as part of ICANN’s new generic top-level domain
(gTLD) which will allow Verisign to bring businesses full domain names in
local language characters. Verisign’s proposed approach for these new IDN
gTLDs will help ensure a ubiquitous end-user experience and helps to
protect consumers and business from having to register purely defensive
domain names in our TLDs. In practice, Verisign’s proposed approach means
that the registrant for a second-level domain name in our IDN.IDN, IDN.com
or IDN.net will have the sole right (subject to applicable rights
protection mechanisms), but not be required to register that identical
second-level domain in any of the top-level IDNs, .COM or .NET as
applicable. In order to illustrate our approach, we have identified two use
cases below:
Use Case No. 1: Bob Smith already has a registration for an IDN.net second
level domain name. That second level domain name will be unavailable in all
of the new .NET TLDs except to Bob Smith. Bob Smith may choose not to
register that second level domain name in any of the new transliterations
of the .NET TLDs.
Use Case No. 2: John Doe does not have a registration for an IDN.com second
level domain name. John Doe registers a second level domain name in our
Thai transliteration of .COM but in no other TLD. That second level domain
name will be unavailable in all other transliterations of .COM IDN TLDs and
in the .COM registry unless and until John Doe (and only John Doe)
registers it in another .COM IDN TLD or in the .COM registry"
(end quote)

Verisign effectively precluded much opposition to their applications. Such
outcry would have been certain, because using similar-sounding and
identical-meaning tlds seriously dilutes domain-owner rights, and can lead
to confusion.

Verisign & ICANN's new approach harms existing .com & .net domain owners.
Now we are forced to try to protect our position with defensive
registrations of their new .IDN domains. With Verisign's premium pricing, a
single gTLD registration may cost hundreds or even thousands of dollars.
Those defensive-registration revenues mostly benefit Verisign, but ICANN
also receives a fixed component of each registration's revenues.

We understand that over many years, conditions and strategies and markets
may change. We can assume the expansive proprietary assertions of Verisign
were always well-meant, and later changes were always legal.

In the interest of all parties, standard business practices today avoid
monopoly contracts without open tender. Both the .NET & .COM Registry
Monopolies should be open to competitive tender.

A billion reasons shout why this contract should be open to bid.

Dr. Bruce Henry Lambert
Helpnet
Stockholm, Sweden

lambert at ieee.org
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