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

["Roberto Gaetano" <ga_chair@hotmail.com>]

Kent,

Incidentally, since you are listing the various things that VeriSign may do 
under option A to keep the monopoly, may I notice that there is nothing 
under option B that prevents VeriSign to buy the company that will win the 
contract for .org, going back to square 1.
Maybe this should also be identified as a pitfall in the FAQ ;>)

Roberto


>From: Kent Crispin <kent@songbird.com>
>To: ga@dnso.org
>Subject: Re: [ga] Option A -- "Divestiture'
>Date: Thu, 22 Mar 2001 08:53:29 -0800
>
>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
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