[council] Vertical Integration Options Report Available to Community

[Bruce Tonkin]

Hello All,

John Jeffrey has made the posting below on the ICANN blog.   Attached is
the relevant advice that was provided to ICANN by external economists -
Steven Salop and Joshua Wright.

The key issue discussed is whether a registrar can own a significant
ownership interest in a registry or vice-versa.

The economists advised:

"We believe that, given all the circumstances, the most reasonable
approach to this issue would be to permit an existing registry to apply
to acquire a significant ownership interest in any new or existing
registrar and a registrar to apply to acquire a significant ownership
interest in any registry. (This approach would not regulate contracts
where there is no significant ownership interest.) Upon receipt of this
application, ICANN staff would calculate the market share of the
applying registry or registrar. If the market share exceeds a critical
threshold, ICANN would take a certain action. If this approach is
adopted, there are two relevant variables that must be decided: the
relevant market share threshold, and the action that would be taken if a
registrar or registry exceeds that share."

It is essentially an approach similar to the Registry Services approach,
where a registry or registrar applies to ICANN for approval.  THe paper
then proposes some processes ICANN could use to make a decision.  

The economists favoured two options:

"Option 2 (Notification and Potential Stay): If the share of the
registrar or the registry that applies to acquire a significant
ownership interest in any new or existing entity at the other vertical
level exceeds the relevant market share threshold, then ICANN will
notify the appropriate governmental competition enforcement agency or
agencies. ICANN will place the application on hold for a period not to
exceed 45 days. This matches the existing waiting period for new
registry services that might raise competitive issues. See
http://www.icann.org/en/registries/rsep/rsep.html. If the agency or
agencies notify ICANN and the registry or registrar during that 45 day
period that the acquisition of the entity at the other vertical level
may violate its competition laws, ICANN will place the application on
hold for another period not to exceed 120 days to allow the agency or
agencies and the applicant to resolve any concerns. At the end of this
period, or sooner if notified by the agency or agencies that any issues
have been resolved, ICANN will resume processing the application."

"Option 3 (Notification Only): If the share of the registrar or the
registry exceeds the relevant market share threshold, then ICANN will
notify the appropriate governmental competition enforcement agency or
agencies. ICANN will place the application on hold for a period not to
exceed 45 days to allow the agency or agencies to take whatever action,
if any, it or they deem appropriate. At the end of that 45 day period,
ICANN will continue to process the application, and the registrar or
registry will bear the risk of any subsequent enforcement action."

Note that option 3 is similar to the Registry Services Evaluation Policy
at: 
http://www.icann.org/en/registries/rsep/rsep.html

which states:
"In the event ICANN reasonably determines during the 15 calendar day
"preliminary determination" period that the Registry Service might raise
significant competition issues, ICANN shall refer the issue to the
appropriate governmental competition authority or authorities with
jurisdiction over the matter within five business days of making its
determination, or two business days following the expiration of such 15
day period, whichever is earlier, with notice to Registry Operator. 

Any such referral communication shall be posted on ICANN's website on
the date of transmittal. 

Following such referral, ICANN shall have no further responsibility, and
Registry Operator shall have no further obligation to ICANN, with
respect to any competition issues relating to the Registry Service. If
such a referral occurs, the Registry Operator will not deploy the
Registry Service until 45 calendar days following the referral, unless
earlier cleared by the referred governmental competition authority (See
Implementation Note Step 5)."

See below for the blog posting.

Regards,
Bruce Tonkin


From: http://blog.icann.org/


Vertical Integration Options Report Available to Community

by John Jeffrey on March 8, 2010

The paper entitled "Registry-Registrar Separation: Vertical Integration
Options" [PDF, 44K] was produced for review by the ICANN Board during
its 4 February 2010 Board Meeting (as was discussed in the preliminary
report of that meeting at
http://www.icann.org/en/minutes/prelim-report-04feb10-en.htm).  It was
requested that the paper be produced to the community to provide further
information on this topic.

As a result of discussions surrounding the implementation of the new
gTLD policy recommendations, ICANN Staff commissioned an economic review
of vertical integration issues relating to new gTLDs in the registry and
registrar marketplace. ICANN engaged Steven Salop (Professor of
Economics and Law, Georgetown University Law Center) and Joshua Wright
(Assistant Professor of Law and Economics, George Mason University) were
selected for their notable reputations and diversity of viewpoints in
the issue area. They have also participated and presented in an ICANN
Meeting forum in Sydney, Australia.

The report is being produced for public consideration as part of the
broader dialogue and inputs on the related issues. The ICANN Board
assented to the publication of the report during its workshop in Nairobi
on 7 March 2010.  It is important to note that publication of the report
should not be considered as a validation of the information or positions
contained therein.  Also, it is not offered as the viewpoint of ICANN,
the ICANN Board of Directors or ICANN Management, but is being offered
to inform the public debate on the topic.

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