ICANN, which has responsibility for managing the internet’s domain name system, yesterday published the proposed next .net contract, and it contains terms vastly clarifying disputed language that VeriSign is suing it over.

The contract also contains language that looks like it amounts to the most explicit declaration to date that ICANN does not regulate the domain name industry.

The proposed new contract would essentially prevent VeriSign, or a successor company, from offering services such as Site Finder, VeriSign’s dormant controversial URL redirection system, unless ICANN has approved it first.

ICANN and VeriSign are currently entangled in a number of lawsuits, the most important of which seeks to clarify exactly how much power ICANN has to approve, or as VeriSign puts it regulate, its registry services.

The four-year-old .net contract has a vague enough definition of registry services that VeriSign took ICANN to court a year ago to have a judge decide whether ICANN acted outside its powers when it ordered VeriSign to shut down Site Finder.

Site Finder was a way for VeriSign to bulk up its advertising revenues. It used its control of the .com and .net domains to redirect users who typed in misspelled URLs to a VeriSign site that offered spelling corrections and advertising links.

The service ran for two weeks in late 2003, but VeriSign shut it down after ICANN complained that it was a registry service that needed ICANN approval before it could be launched, and that it disturbed the stability of the DNS, both claims VeriSign refuted at the time and is now refuting in court.

The proposed .net contract, which will likely form the basis of other future new domain contracts, spells out registry services in broad terms that essentially will give ICANN a 15-day window to study virtually any service the next .net operator plans.

While the current contract has room for interpretation, the new proposed language says that any other products or services that only a registry operator is capable of providing, by reason of its designation as the registry operator are registry services.

This would leave Site Finder, and several other scuppered services that VeriSign has planned to offer over the last few years, requiring ICANN scrutiny and approval before they could be launched.

ICANN would have 15 days to decide whether the proposed service is a registry service that requires further discussion. Its determination would be based on whether it does not raise significant security or stability… or competition issues.

The word competition is key, and could have something that would have been seized upon by ICANN’s opponents to show that the organization is managing not only technical concerns, but also market-oriented issues.

However, ICANN says that if it does spot a competition problem, it will refer the issue to the appropriate governmental competition authority or authorities with jurisdiction over the matter within days. It does not specify the authority, but the contract would be subject to California law.

ICANN would apparently only have power to block a registry service alone if it posed significant stability or security issues. The definition of stability talks about consistency, and would likely prevent Site Finder being deployed in .net again.

The current .net contract expires in June, and four of VeriSign’s competitors are bidding to take the highly prestigious deal away from it. VeriSign has done a remarkable lobbying job over the last year, and is still the favorite to win the deal, having run .net without published incident for seven years.

But whoever wins the bid will have between March 28, when ICANN will make its decision, and June 30 to finalize the terms of the .net contract. As we pointed out in coverage last November, that’s a powerful negotiating position for ICANN.

ICANN said that a panel from Telcordia Technologies Inc, supplemented by DNS experts, is currently evaluating the five bids. On March 28, ICANN will publish decision, request public comment, and start talks with the winner, at the same time.

ICANN says the new registry services terms are based on input from its Generic Names Supporting Organization, which published a report on the matter last November. The report has little to say on the subject of competition concerns.