[registrars] ICANN Letter Regarding VeriSign Settlement

[Tim Cole]

Colleagues,

Kurt Pritz has asked me to forward the letter below to the Registrar
Constituency.

Tim Cole
Chief Registrar Liaison
Internet Corporation for Assigned Names and Numbers



ICANN Registrar Constituency:

Thank you for this opportunity to make the Registrar community aware of the
proposed settlement with VeriSign. ICANN is seeking to end all pending
litigation over this long-standing dispute. The settlement agreement
documents have been posted for public comment on ICANN's website
(www.icann.org) and are subject to final approval of the ICANN Board. In
addition to comments received, there are some specific issues we would like
to discuss with you, now that we are in a position to do so. An important
purpose of this posting is to solicit the views of the Registrars'
constituency on all of the settlement documents. 

The parties entered into non-public negotiations in an effort to establish
whether it was possible to reach an agreement. The negotiations led to a
lengthy set of discussions regarding specific provisions of the agreement
and the conflict points and also sought consultation with the US Department
of Commerce, as required by the present .COM agreement. 

We understood in entering into these discussions that it would be nearly
impossible for a public company such as VeriSign to participate in an open
and public dialogue for the resolution of such a dispute, without a concrete
proposal regarding how the settlement could be constructed. Therefore, ICANN
negotiated the best possible deal that it believed that it could negotiate
in the public's interest, and required a full 24-day public comment period
before board approval would be sought.  

All ICANN constituencies and advisory committees are being asked directly
for input. Following this public comment period, ICANN's Board will evaluate
the public comments received and decide on next actions relating to this
entire settlement proposal.  

This letter is intended to provide information regarding the proposed
agreement and use of the comment period by providing:
.	some back ground on the conflict and detail regarding the proposed
settlement, 
.	benefits accruing from the agreements to the registrars,
.	identification of issues that remain to be discussed during this
comment period,
.	a plan for how to carry the discussion forward.


Background, the settlement and agreement

>From ICANN's inception it has existed in conflict with the principal
commercial entity in the DNS space, the .COM registry operator, and that
conflict has continued in various forms up until this time. NSI was acquired
by VeriSign in 2000, and since that time ICANN and VeriSign have been
involved in a series of additional conflicts.  
 
This tension and conflict has heavily influenced the contractual
relationships between NSI/VeriSign and ICANN from the beginning. The first
agreement with the operator of the .COM Registry was in 1999, and was
brokered by the United States Department of Commerce with a reluctant NSI.
This agreement framework created the separation of registries and registrars
and introduced the opportunity for new players in the registrar market. 
 
That agreement was replaced with a new agreement in 2001, which split the
1999 agreement (which covered .COM, .NET and .ORG) into three separate
agreements, one for each registry. Unlike the others, .COM Registry
Agreement included a presumptive right of renewal to VeriSign. The .ORG
Registry was re-bid with a presumption that it would go to a third party and
was subsequently awarded to PIR. The .NET Registry was re-bid during the
last year, without a presumption of renewal or a presumption of a change of
operator and was re-awarded to VeriSign. The growing diversity of business
models among registrars was reflected in the variety of responses to this
new contract. 
 
The original 2001 .COM Registry Agreement containing the presumptive right
of renewal to VeriSign did not fully resolve the various fundamental
differences of view between ICANN and VeriSign, and those differences have
continued to generate disputes up to and including the issues involved in
the current litigation. 

The proposed settlement will end ICANN's dispute with VeriSign. The
litigation focused on the introduction by VeriSign of new "Registry
Services" and whether the current .COM agreement (signed in 2001) provided
for oversight by ICANN over the introduction of services (such as
"SiteFinder"). It was quickly understood that the settlement discussions
were inextricably bound up in the contract language and that any settlement
required a re-writing of the registry agreement. It was necessary for the
parties to renegotiate terms within a new .COM Registry Agreement relating
to a new clear definition of registry services and the approach for approval
of such services. Therefore, in concert with the settlement, ICANN and
VeriSign have entered into a new proposed registry agreement. 

The settlement has been in negotiation for many months, with talks extending
back to late 2004. The new agreement has been streamlined from the old (161
pages versus 91). It provides that VeriSign will operate the registry into
2012. 


Benefits accruing from the agreement

We see several benefits accruing from the proposed settlement. The
settlement ends a costly, time-consuming litigation. The end of the
litigation and the provision for binding arbitration in the future will also
end the diversion of resources applied to this litigation over the past two
years. Many things of importance to the ICANN mission and to registrars have
been left undone and can now be accomplished.

Additionally the agreement, we think, will facilitate the introduction of
new registry services by VeriSign that are intended to increase the number
of registrations. The confrontational nature of the VeriSign/ICANN
relationship prior to the settlement certainly slowed the introduction of
new services. Having greater certainty and speed will facilitate the
introduction of new business opportunities for registries and registrars.

The new registry services process should also work to provide certainty,
additional markets and protect registrars against unanticipated product
introductions that may have an adverse affect. VeriSign has agreed to a
definition of registry services that ensure that new product introduction
will be vetted for adverse stability, security and competition effects prior
to deployment. Also, the agreement puts into place a standing technical
panel in order to ensure timely, unbiased opinions regarding the potential
effects of product introductions on security and stability of the DNS.
Competition issues will be referred to appropriate governmental competition
authority/authorities; the proposed agreement clarifies ICANN's role and
recognizes that determination of whether a registry's action is competitive
or anti-competitive is an appropriate function of existing national bodies

The agreement also provides certainty as to the price of a domain name going
forward. Under the terms of this agreement, VeriSign can raise the price of
a name up to 7% each year. It is understood that any increase in price over
$6 will affect some business models. The price has been constant for six
years. While price increases are rarely welcome, this agreement provides a
ceiling and notice of prices for the next seven years. During the
negotiations, a significantly wider range of price increases was suggested
and discussed. This negotiation was not a competitive re-bid process where
there existed leverage for reducing the per name price. 

The price changes described in the agreement provide notice and an
opportunity to react to increases: there must be at least six months notice
before any price increase; there will continue to offered registrations for
up to a ten year term, to allow those who want to guarantee their
registration costs for ten years to do so; and there are restrictions on
VeriSign creating tying arrangements.

Because of the presumptive right of renewal to VeriSign for the .COM
Registry, ICANN's negotiating power relative to pricing and other key terms
is significantly different than in the setting of terms for the re-bid
relating to the .NET Registry. Accordingly, as ICANN accredited registrars
and customers of VeriSign we are requesting your review and comments
relating to this settlement and the accompanying .COM Registry Agreement.


Issues for discussion

The comment period is intended to provide opportunity for discussion of
areas of interest to parties not named in the agreement so that these issues
can be taken into account. Some of these issues have been identified by
registrars in discussions after the agreement was posted:
.	Increases in the price VeriSign charges registrars for domain names.
.	The combination of registrar and registry fees that will be invoiced
and discussion of a reduced fee level for registrars that can be approved in
a timely manner. 
.	The manner in which fees are potentially passed from registry to
registrar and then on to registrants. This may include a requirement for
line-itemization of all fees on the registrant invoice. 
.	Description of long-term ICANN revenue goals that are a prerequisite
to achieving the goals set out in the USG MoU and gaining independent
status. 
.	The process by which registrars approve the variable registrar fees
described in the adopted budget now and in years going forward. 


The discussion forward 

The proposed agreement is being posted for public comment for 24 days. This
time period should be used to discuss and determine with clarity various
positions on the issues above. This can be done with a series of generally
attended conference calls, individual consultations and meetings with
registrar representatives. Many registrars participated through the
registrar representatives in negotiation of the .NET agreement. 

ICANN will arrange with registrars involved in the discussion or there
representative a series of consultation through the comment period to ensure
full discussion and consideration of the issues raised. 

We look forward to receiving the Registrar community's input. If you have a
comment and participate, that contribution will be taken into account.

Thank you for the time taken to read and consider this material.


Sincerely,

Kurt Pritz
ICANN