Re: [ga] Option A -- "Divestiture'

[Kent Crispin <kent@songbird.com>]

On Thu, Mar 22, 2001 at 10:35:49AM -0500, Jonathan Weinberg wrote:
>          Brets point (unsurprisingly) is worth careful attention.  The FAQ 
> materials shed new light on the issue raised by James Seng in his post a 
> few days ago:  Materials circulated by Verisigns investment bankers seem 
> to take for granted that if Verisign does divest the registrar, it will 
> nonetheless continue as a *reseller* of domain names. It seems to me that 
> this new operation would likely differ from Verisigns existing registrar 
> business in at least three ways.  First, Verisign would have to give up the 
> Network Solutions name and trademarks to the acquirer, since the existing 
> contract requires Verisign to divest[] all the assets of the registrar 
> business to the acquirer, and the Network Solutions name and trademarks are 
> part of those assets.

But of course, there is nothing whatsoever that prevents the new owner 
from licensing use of the NSI name back to VRSN.

>  So the new Verisign reseller operation would need a 
> new name.

No, it wouldn't.  

>  Second, the NSI Registrar employees, servers, intellectual 
> property, and so on would also be going to the acquirer - those, too, are 
> part of the 'assets' that must be divested.

But  there is no way to keep VRSN from re-hiring those employees, and  
the intellectual property can all be licensed.  Moreover, the FAQ makes 
clear that there are substantial questions about distinguishing what 
part of the business can be allocated to the registry and what part to 
the registrar.

> So Verisign's reseller 
> business would have to be a new business, not just NSI Registrar under a 
> different name.

Please define "new business".  There are no clauses in the current
contract that really define this, and, as the FAQ makes quite clear,
there is large room for interpretation on the part of ICANN, VRSN, and
DOC.  

Bear in mind that once VRSN commits to going down this road, there is an
associated enforcement cost that must be born by ICANN, in dealing with
the unique situation between VRSN and any buyer. 

> Third, the Verisign reseller, having taken a registration 
> from a member of the public, couldn't simply enter the name in the SRS, but 
> would have to buy that service from some accredited registrar.

But of course, that accredited registrar could simply be a new 
registrar created by VRSN.  And that new registrar could simply 
implement a pass-through.  VRSN doesn't need to do this, of course.

>          Though James's message can be read to suggest otherwise, I think 
> it's *not* likely that any divestiture could require the acquiring 
> registrar to take registrations only from Verisign and nobody else.

It doesn't need to.  The only thing that VRSN really needs to do is 
maintain its market share, and there are many many tools by which it 
can do that.

>  That 
> would tie the companies together so closely as to raise the persuasive 
> argument that the divestiture was a sham, and would, I think, violate the 
> contractual language forbidding any arrangement under which Verisign would 
> be able, 'directly or indirectly, to direct . . . the operations or 
> policies' of the new registrar.  Nor does it make a lot of sense to me that 
> Verisign would want to include such a restriction, which would reduce its 
> sale price with no corresponding benefit.

Keeping market share seems to me like a pretty substantial benefit.

> What should we think about such a result?  It would eliminate any 
> existing incentive for Verisign Registry to bend the existing equal-access 
> rules requiring it to treat all registrars equally (since any profits 
> flowing from that rule-breaking would no longer flow to Verisign 
> itself).

No, that simply isn't true.  Assume a small registrar with a small 
retail side and a single enormous reseller.  Favors to that small 
registrar could easily flow through to that reseller.

> I suspect that it would likely increase the number of 
> high-visibility players in the selling-domain-names-to-consumers 
> market. 

The FAQ notes that the retail end of the business is not particularly 
valuable. 

> That depends on who the acquirer is, natch, but my guess (and this 
> is only a guess) is that the acquirer is *not* likely to be one of the 
> larger existing registrars: those companies have spent too much money 
> building their infrastructure and trademarks to be willing to pay full 
> price to buy NSI's.  OTOH, this resolution won't satisfy those who want to 
> see Verisign out of the registrar or reseller business entirely.

There were multiple loopholes mentioned in the FAQ.  The main point is
that there are many, many ways that VRSN can arrange to maintain its
market share, and it certainly has significant interest in doing so.  

Bear in mind that we simply don't have the same incentive that VRSN does
to think about this creatively. 

-- 
Kent Crispin                               "Be good, and you will be
kent@songbird.com                           lonesome." -- Mark Twain
--
This message was passed to you via the ga-full@dnso.org list.
Send mail to majordomo@dnso.org to unsubscribe
("unsubscribe ga-full" in the body of the message).
Archives at http://www.dnso.org/archives.html