FC: Snapnames.com: ICANN must approve "wait list" for expired domains

[Declan McCullagh <declan () well com>]

---

From: Cameron Powell <CameronP () Snapnames com>
To: "'declan () well com'" <declan () well com>
Cc: Mason Cole <MasonC () Snapnames com>
Subject: Posting Requested
Date: Mon, 17 Jun 2002 16:33:14 -0700
MIME-Version: 1.0

Dear Declan,

Would it be possible for you to post on your Politech list a document we
have written regarding ICANN's role in approving new registry services?  It
is topical with respect to the WLS, but it is also broader than that.  I'm
not sure whether you prefer the document embedded in an email or as an
attachment, so I'll do both.

Please let me know if you need anything else.

Sincerely,
 <<Part I  ICANN Standard of Review  6.17.02.doc>>


Cameron Powell
VP of Business Development and General Counsel
SnapNames
115 NW First Avenue
Suite 300
Portland, OR  97209
(503) 219-9990 x229    (503) 502-5030 cell    (503) 274-9749 fax
cameronp () snapnames com


The ICANN Board Should Promptly Approve the WLS Proposal

Since the early fall of 2001, VeriSign and ICANN have been participating in
discussions about deleted names and a "parallel registry" -- the original
name of the WLS concept -- along with the larger ICANN community.  These
first discussions originated at ICANN meetings in Montevideo on September 9,
2001.  For nearly two months afterward, in September and October,
registrars, resellers, speculators, and attorneys amassed hundreds of
e-mails in an intense online debate, which was monitored by ICANN staff.
Afterwards, VeriSign again communicated to registrars that it would be
willing to consider offering the "parallel registry" technology while
continuing to offer the three-pool system that had solved the technical, if
not equitable, aspects of customer access to deleted names.  At the November
ICANN meetings in Marina del Rey, the registrars asked VeriSign for a more
detailed proposal.  The detailed proposal was submitted in late December
2001 after review and suggestions by ICANN staff (for example, even at this
early date, ICANN negotiated with VeriSign the 12-month trial period, and
insisted on omission of .ORG from the proposal).  That proposal for the
first time termed the technology the Wait-Listing Service (WLS).

Based on a second round of discussions during January, VeriSign, with
ICANN's input, distributed a revised WLS proposal to stakeholders in the
DNSO on January 28, 2002.  That second proposal included specific procedures
and a timeline for a third round of community input.  After the ensuing
third round of discussions during February and March, and after the Names
Council and the General Assembly meetings in Accra in March 2002, VeriSign
requested that ICANN amend Appendix G to VeriSign's contract to add a price
for a new service that VeriSign, using SnapNames-developed and -provided
technology, would offer to the marketplace.  ICANN's staff then requested
still a fourth round of public comment.

The service, called the "Wait-Listing Service," will allow subscribers (who
are waiting for a particular existing domain name registration to expire) an
equal opportunity to buy through a registrar a subscription to be first in
line for that particular name.  Because the WLS will involve making a record
that will be consulted by the registry in deciding who may be the next
registrant of an expired name, it is certain to be effective, fair, and
transparent.  By contrast, registrar-offered services today can only "ping"
the registry database continually and inefficiently (up to 500,000 times per
name) to find out whether a particular name is available, and most do so
only on behalf of a handful of customers.  And a registrar on its own can
provide no guarantee that a desired name will actually go to someone paying
for its service.

We know the WLS will be good for registrants, because it will provide
certainty and will save registrants time, effort, cost, and anxiety.  But
that's not the point of this paper.  (We discuss the merits of the WLS in a
companion paper prepared for the Board.)  We are submitting this paper to
explain why the Board should carefully limit the scope of its review of the
proposal.

ICANN's Review of a New Registry Service is Narrowly Limited

Based on our review of the agreements ICANN has with registries, ICANN has
three questions to ask in connection with new services to be offered by
registries:  effect on interoperability; whether there is an avoidance of
the price cap on basic registration services; and whether a consensus policy
exists prohibiting the new service.

WLS Raises No Operational Issues.  To make sure that the registration system
remains stable and interoperable, ICANN has the power to approve changes to
the protocols that allow registrars' and registries' machines to talk to
each other (e.g., .net Registry Agreement, Section 3.2).  There has been no
suggestion that WLS will have any adverse effect on interoperability, and
indeed it will not, so interoperability is not an issue here.

WLS Cannot Be An Evasion of The Price Cap for Basic Registration Services.
To make sure that registrants who have made an initial investment in a
domain name won't be "locked-in" to paying high prices later for mandatory
services that are inextricably intertwined with their registrations, ICANN
is permitted to make sure that the registry may not charge an unreasonably
high price for a new mandatory service in order to avoid the protections
provided by the contractual price cap on basic registration services.
(e.g., .com Registry Agreement, Appendix G and Section 22(B)).  This price
approval mechanism was intended to avoid, for example, a registry selling
Yahoo! the domain name yahoo.com for $35 in 1995, and then charging a
"hold-up" price on renewal of that name in 2003.

In the case of WLS, which is both reasonably- and market-priced and
optional, concerns about the "lock-in" effect caused by fees charged for
mandatory services are non-issues as well.

WLS is not a mandatory service.  No registrant has to buy a subscription to
WLS.  To protect their existing registrations, registrants merely have to
remember to renew their names on time, or to continue to purchase multi-year
registrations.  Registrars properly bear the burden of providing ample
notice to their customers of the need to renew; indeed, only registrars (not
the registry which would be offering WLS) have the customer's contact
information, and registrars have every financial incentive to use it.  (And
if they do not, the existence of the WLS will not change the status quo
today, where someone other than the original owner will still get the name
-- albeit through back-room, non-transparent arrangements with registrars
for privileged VGRS access.)

WLS is an optional service for would-be registrants who don't know (and
don't have the time or want to know) the timing of every batch-delete file,
and who don't want to have to check a name's availability every day or even
every few hours, but who do want the convenience of knowing they will be
first in line for a name registration.  These potential registrants want to
know that if that particular name becomes available (as up to 800,000 have
per month), it will be reliably theirs.  Because WLS is not a mandatory
service (and is offered at a price reasonably related to its value), there
will be no end-run around the protections provided by the basic registration
services price cap.

No Consensus Policy Exists Prohibiting the WLS.  ICANN may consider whether
a new service is prohibited by an existing (and binding) consensus policy.
(e.g., .com Registry Agreement, Section II(3)(A)(ii)).  With regard to the
WLS, there is no such policy.

While some have suggested that ICANN's decision on the requested amendment
should itself be subject to the "consensus process," the consensus process
does not apply to this type of decision.  The consensus policy clause in the
contracts that registries have signed with ICANN concerns mandatory policies
that (a) all registries must follow and that (b) deal with generally
applicable future rules -- not with a question whether a particular new
service may be priced at a certain level by a particular registry.  The
whole purpose of the consensus policy process outlined in these registry
agreements was to make clear that registries are free to innovate unless and
until a consensus policy is created to prohibit some particular practice -
not, as has been stated, that a registry requires a consensus in order to
innovate.

Moreover, because there is no Independent Review Panel, as required for
consensus policymaking, registries are not even contractually bound to
follow consensus policies arising out of such non-compliant consensus
processes.  (.com Registry Agreement, Section I(1)(F).)  In any event, there
is clearly no consensus here that services like WLS may not be offered by
registries.

ICANN's Review Is Limited to Considering Whether the Proposed Price for the
WLS Is Unreasonable.  ICANN's obligation under its agreements with
registries is to consider only questions bearing on the reasonableness of
the proposed price.  ICANN is not entitled, under these contracts, to
consider whether or not it (or possible competitors) considers the service
to be valuable or desirable -- that is for the market to decide.  Nor does
ICANN have any role in deciding questions of legal or economic policy,
market demand or innovation.  Indeed, ICANN is not allowed to disapprove any
new registry services (even "mandatory services") that are provided for
free.  (The contract provides only that a registry may not charge a price
exceeding one set forth in Appendix G.)  The fact that ICANN cannot
disapprove free services demonstrates that the purpose of the review sought
here is solely to prevent unreasonable prices, and that ICANN may not
withhold approval for any ulterior or extraneous purposes.  Of course, some
Board members have indicated in the past that they should have no role at
all in price-setting, including because no other private company has ever
attempted to exercise such power in an industry, and of course such Board
members may elect to apply a more deferential standard, including the
traditional standard of permitting the market to set prices.

The Proposed Price for the WLS Is Reasonable.  Although there might
theoretically be cases where a price being charged for a new registry
service is so out of line with the value of that new service that ICANN
should disapprove the price, that is not the case here.  WLS is reasonably
priced in relationship to its value.  At a wholesale price of $24-$28
(following a planned rebate to registrars from VeriSign), WLS will clearly
provide benefits, for those who choose to use it, that far exceed the
proposed cost.

For higher prices, registrars are currently offering to a few exclusive
customers their own services to access the registry for deleting names, and
those services are inescapably inferior.  As just a few examples, there is
an American registrar who charges ten speculators each $2500 per month for
preferential access to VGRS, plus registration fees; a Russian registrar and
partner who charge $669 for enhanced-access "membership," plus $100
registration fees; and a Korean registrar who charges $237 per name
registered through privileged access -- all of these charges far exceed the
proposed price for WLS, but the services provided in exchange for these
prices are far less effective and reliable than the WLS, in addition to
being only selectively available.  ("Part II:  The Merits of the WLS" sets
forth pricing information in even greater detail at around page 17.)

ICANN Is Required To Foster Competition and Innovation, Not Prevent It.

It is not clear that ICANN has contractual or other authority (absent an
existing and properly documented consensus policy, which does not exist
here) to prevent new services from being offered by registries; its only
authority relates to adding the price of those services to the registry
agreement(s).  ICANN is required by its bylaws and contracts to foster
competition, not to favor or disfavor particular competitors or services.
(See, e.g., .com Registry Agreement, Section II(4)).  Indeed, denying the
proposed amendment to Appendix G on the basis of considerations advanced by
competitors (who make up the bulk of the very vocal minority critical of
WLS) who are arguing for prohibition of a new service would raise very
serious antitrust issues, violate the implied duty of good faith and fair
dealing that accompanies every contract, and raise other questions regarding
ICANN's authority and legitimacy.

In contrast, carefully limiting the Board's actions in compliance with the
contractual interpretation set forth above would avoid such questions.  And,
of course, contracts should be interpreted so as to avoid the implication
that the parties agreed to any unlawful course of action.

Thus, any decision by the Board to prevent introduction of WLS -- whether
based on a claimed consensus or otherwise -- would raise substantial legal
questions.  ICANN should not put itself in the position of protecting
particular competing parties from new competition.  The antitrust laws
protect only competition, not individual competitors.

WLS will be a lawful and voluntary new service.  The market should and will
decide whether WLS is a valuable service.  Because the proposed price for
WLS is demonstrably reasonable, and no contrary evidence exists or could be
supplied, ICANN should not, consistently with its contracts and authorized
role, decline to approve the proposed amendment on the basis of the
circumstances present in this case.


Endnotes:  Verbatim Excerpts from the .net and .com Registry Agreements

i  3.2 Functional Specifications for Registry Services. All Registry
Services provided by Registry Operator shall be provided under this
Agreement and shall meet the functional specifications established by ICANN.
The initial functional specifications are set forth in Appendix C
<http://www.icann.org/tlds/agreements/verisign/registry-agmt-appc-16apr01.ht
m>. Non-material changes and additions to the functional specifications may
be made by Registry Operator with prior written notice to ICANN and any
affected ICANN-Accredited Registrars. All other changes and additions to the
functional specifications may be made only with the mutual written consent
of ICANN and Registry Operator (which neither party shall withhold without
reason) or in the manner provided in Subsections 4.3 through 4.6.

ii Section 22(B).  Registry Operator may, at its option and with thirty days
written notice to ICANN and to all ICANN-accredited registrars, revise the
prices charged to registrars under the Registry-Registrar Agreement,
provided that (i) the same price shall be charged for services charged to
all ICANN-accredited registrars (provided that volume adjustments may be
made if the same opportunities to qualify for those adjustments is available
to all ICANN-accredited registrars) and (ii) the prices shall not exceed
those set forth in Appendix G
<http://www.icann.org/tlds/agreements/verisign/registry-agmt-appg-com-16apr0
1.htm>.
iii Section II(3)(A)(ii).  Registry Operator shall comply, in its operation
of the registry, with all Consensus Policies insofar as they:
                (a) are adopted by ICANN in compliance with Section 4 below,
                (b) relate to one or more of the following: (1) issues for
which uniform or coordinated resolution is reasonably necessary to
facilitate interoperability, technical reliability and/or stable operation
of the Internet or DNS, (2) registry policies reasonably necessary to
implement Consensus Policies relating to registrars, or (3) resolution of
disputes regarding the registration of domain names (as opposed to the use
of such domain names), and
                (c) do not unreasonably restrain competition.
iv  Section I(1)(F).  In the event that, at the time the ICANN Board
establishes a specification or policy under the first paragraph of
Definition 1 above during the term of this Agreement, ICANN does not have in
place an Independent Review Panel established under ICANN's bylaws, the
fifteen working day period allowed under Subsection (A) above to seek review
shall be extended until fifteen working days after ICANN does have such an
Independent Review Panel in place and Registry Operator shall not be
obligated to comply with the specifications or policy in the interim.
v  Section II(4).  General Obligations of ICANN. With respect to all matters
that impact the rights, obligations, or role of Registry Operator, ICANN
shall during the Term of this Agreement
                A. exercise its responsibilities in an open and transparent
manner;
                B. not unreasonably restrain competition and, to the extent
feasible, promote and encourage robust competition;
                C. not apply standards, policies, procedures or practices
arbitrarily, unjustifiably, or inequitably and not single out Registry
Operator for disparate treatment unless justified by substantial and
reasonable cause; and
                D. ensure, through its reconsideration and independent
review policies, adequate appeal procedures for Registry Operator , to the
extent it is adversely affected by ICANN standards, policies, procedures or
practices.




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