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December 1, 2005

VeriSign’s channel revolting over .com

VeriSign Inc faces significant opposition from its channel of domain name registrars over a proposed deal with the Internet Corp for Assigned Names and Numbers that would allow the company to raise the price of a .com registration.

By CBR Staff Writer

At a public meeting in Vancouver, registrars took their concerns to ICANN’s board, which will decide some time next year whether VeriSign should keep .com for another five years and give it the option to raise prices 7% a year.

The proposed deal was announced late October, as part of a settlement of a two-year-old antitrust lawsuit in which VeriSign accused ICANN of illegally regulating its business when it blocked the controversial Site Finder system in 2003.

The prevailing suspicion in the registrar community seems to be that ICANN accepted a settlement that was overly favorable to VeriSign, even though ICANN stood a good chance of winning the suit, because ICANN itself is running out of cash.

By settling, ICANN gets to eliminate its burdensome legal fees. Also, the proposed .com contract builds in a new registry fee, in which ICANN takes $0.37 per year, up to $0.50 in 2007, for every .com domain registered.

Several registrars characterized this as another fee that would force them to either raise their retail prices and risk losing customers or to swallow the fee themselves and reduce their already razor-thin profit margins.

In addition, some worry that increased fees and prices will kill business models based on domain speculation, or that higher prices will chill demand for .com domains in emerging markets in the developing world.

During the meeting, which was characterized by an almost uniformly passionate aversion to the proposed deal, several registrars questioned whether ICANN rushed into to settlement just to get VeriSign off its back and keep its books in the black.

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Clint Page of Dotster Inc asked whether ICANN had been forced by some degree of pressure into an ill-advised agreement because of [VeriSign] the 3000-pound gorilla.

Tom Barrett of EnCirca Inc suggested that maybe the needs of ICANN were not aligned with the needs of the internet, and maybe ICANN was satisfying some internal needs when it negotiated the deal.

ICANN chair Vint Cerf replied: I honestly do not believe that was part of the issue.

During the meeting, a slide projected onto the wall suggested that some registrars may have been considering committing to fund ICANN’s legal defense directly, but this was not publicly addressed by registrars.

Some registrars also posed the notion that ICANN should put the lucrative .com contract up for rebid, which it is allowed to do if VeriSign materially breaches its terms. ICANN, in court filings, is on record alleging that VeriSign did so with Site Finder.

Site Finder was a system whereby VeriSign intercepted calls for non-existent .com and .net domain names and returned a web search page with contextual advertising instead of the more usual domain-not-found error message.

Many technologists argued that this upset the stable and predictable performance of the internet, but VeriSign said that it was well within its rights to commercially exploit its management of those registries.

One German registrar said, bluntly: My position is that the .com registry should be taken away from VeriSign. VeriSign has several times demonstrated misbehavior. I’m not just talking about Site Finder, they had a $200m budget they promised to use for developments for the community, and up to now we haven’t seen any of that.

The current .com contract has VeriSign committing that cash in infrastructure improvements, but so far there has been no published accounting of how or if that money was invested.

The date ICANN’s board will to vote on the settlement has been delayed by the outcry against it, and it is not likely to see a vote until ICANN’s next meeting in March 2006 at the earliest.

A group of secondary market domain name companies are also suing ICANN and VeriSign in California on antitrust grounds, and have now said they have referred the case to the European Commission’s competition directorate.

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