RE: [ga] Revised WLS Proposal

["Gomes, Chuck" <cgomes@verisign.com>]

Here's the justification paper:

Justification for a Registry-based Wait Listing Service

January 28, 2002

This paper was prepared by VeriSign Global Registry Services (VGRS), the
registry for .com, .net and .org second-level Internet domain names.  It
is designed to be a supplement to the revised proposal for the VGRS Wait
Listing Service (WLS) proposal issued for comment on January 28, 2002.
The WLS proposal was originally submitted by VGRS to the ICANN Domain
Name Supporting Organization (DNSO) Registrars Constituency in response
to a request from that constituency received in November 2001.

The purpose of the paper is four-fold:
1.	To provide a brief overview of the VGRS proposed WLS for .com
and .net second-level domain names.
2.	To provide members of the Internet community a high level
overview of the current situation with regard to registering previously
registered .com, .net and .org second-level domain names
3.	To highlight what VGRS sees as the advantages of the WLS
4.	To provide responses to some of the concerns raised with respect
to a Registry-based Wait Listing Service.

1. Overview of the proposed WLS

WLS is a service whereby potential registrants (referred to as
“subscriber(s)” in the proposal), through their selected, participating
registrar, may purchase a subscription tied to a currently registered
.com or .net domain name.  The WLS subscription would allow a subscriber
to be the first in line to register a deleting domain name.  A deleting
name is a domain name whose registration expires and which again becomes
available for registration.

Subscriptions would be available only through ICANN-accredited
registrars, who would perform all subscription transactions directly
with VGRS.  All current processes would remain unchanged, with one
exception:  A domain name secured through a WLS subscription would be
registered to the WLS subscriber if and when the current domain name
registration is deleted through normal operational procedures.

The VGRS proposal recommends a 12-month trial period for the WLS after
which an evaluation would determine whether to continue the service.
For additional details about the WLS, refer to the revised proposal.

2. Overview of current processes for registering deleted names

In the current gTLD registry environment, if a consumer would like to
obtain a domain name that is already registered, there are several
options including but not limited to:
i)	Waiting and then competing with speculator and registrar
technology - end-users waiting until the domain name is deleted from the
applicable registry’s database and then trying to register it through
any ICANN-accredited registrar for the applicable top-level domain.
Deletions can happen in several ways, including: a) an explicit deletion
by the current registrant through his/her registrar before or after the
registration period expires; b) an explicit deletion by the registrar
before or after the registration period expires because of violations of
the registration agreement by the registrant; c) an explicit deletion by
the registrar because a registrant failed to renew its registration.
Nothing, of course, guarantees that the consumer will be the first to
register the deleted name.  Indeed, given the robotic attacks by
speculators who routinely register many names within moments of their
deletion, the chance that a consumer will be “first come, first served”
is the exception rather than the normal rule.
ii)	Negotiating with the current registrant – end-users contacting
the current registrant and offering to purchase the registration. If
this is successful, the current registrant has to work with its
registrar to change the registrant information and other applicable
registration information.
iii)	Initiating dispute proceedings – end-users initiating an ICANN
Uniform Dispute Resolution Policy (UDRP) complaint and/or a court
proceeding. If the UDRP or court action is successful, the registrar
involved would transfer the registration to the new registrant.
iv)	Scouring auction sites – end-users checking to see if the name
is offered on one of several domain name auction sites and, if it is,
following the applicable procedures of the auction site to bid on the
name. If the bid is successful, the current registrant would have to
work with its registrar to change the registrant information and other
applicable registration information as in i) above.
v)	Subscribing to SnapNames back-orders – end-users purchasing a
SnapBackTM for the name.  (Amazonshopping.com and AmericanExpress.net
were recovered by their respective owners using this SnapBack™ service.)
SnapBacks are offered by SnapNames, Inc. through various ICANN
accredited registrars who have opted to participate in this offering.
SnapNames then works through registrars to compete for the registration
of the name, if and when the name is deleted from the registry database.
vi)	Using a registrar that specializes in registering newly deleted
names – end-users identifying a registrar or a registrar reseller who
specializes in registering newly deleted names.  There are a variety of
companies who are involved in providing variations of this service.
vii)	Negotiating with speculators – end-users identifying a domain
name speculator who has successfully registered the desired name and
agreeing to the speculator’s terms for obtaining the registration of the
name.

If the WLS is implemented, the predicted impact on the above options
would be as follows:
i)	Waiting and then competing with speculator and registrar
technology – There is no impact if there is not an active wait listing
subscription for a name.  If there is an active wait listing
subscription for a name, the name would not be available for
registration after deletion.
ii)	Negotiating with the current registrant – no impact
iii)	Initiating dispute proceedings – no impact
iv)	Scouring auction sites – no impact
v)	Subscribing to SnapNames back-orders – The WLS would improve
upon the current registrar-based SnapBack offering.  Instead of relying
on SnapNames’ estimated 70%+ success in competing with speculators’ and
registrars’ attempts to register just-deleted names [options i), vi) and
vii) above], a customer with an active WLS subscription would be 100%
guaranteed to have the domain name registered if it is deleted in the
registration database.  (Note: VGRS has licensed SnapNames’ technology
in case the WLS service is implemented.)
vi)	Using a registrar that specializes in registering newly deleted
names – Businesses that specialize in registering newly deleted names
for speculators could participate in the WLS offering while also
offering their current services, although it seems reasonable to expect
that the number of names deleted (i.e., those without WLS subscriptions)
would decline.
vii)	Negotiating with speculators – Speculators would be free to
subscribe to the WLS service, although presumably at a higher cost (and
therefore at a reduced frequency) as compared to today.  They would also
still be able to pursue the registration of deleted domain names just as
they do now, though the number of names not wait-listed would probably
be less than it is currently.

3. Advantages of the proposed WLS

The proposed WLS embodies the following critical principles:
§	All end-users (registrant or potential registrant) are provided
equal opportunity to register a name that may potentially be deleted in
a way that:
o	Is simple and clear
o	Provides 100% certainty if the name is deleted  (Note: the only
way this level of certainty can be provided is for the service to be
offered at the registry level.)
o	Allows mainstream would-be registrants equal access to deleting
names without losing opportunity to speculators who have sophisticated
systems or relationships that allow them superior access.
o	Is more open and transparent than today’s informal system in its
risks, benefits, and access to the system.
§	Registrars are given equal opportunity at an equal wholesale
price to participate in the WLS offering while at the same time having
the option of not participating.  Registrars that do not currently
benefit from the large number of deleting names because they do not
primarily service speculators can, by implementing the WLS offering,
begin to participate in the secondary market and its rewards for the
first time.
§	The WLS is proposed as a 12-month trial to allow for:
o	Thorough evaluation of the service before making it a permanent
offering
o	The opportunity to gather empirical evidence with regard to:
§	Demand in the marketplace for such an offering (a demand that
has already been demonstrated for several years)
§	Market price tolerance for the WLS
§	The ability of registrars to differentiate WLS service offerings
§	Internet policy concerns
o	To specifically allow for refinements to the offering if it is
determined to be a valuable service to the community.

Following are what VGRS believes are advantages to key members of the
Internet community as related to the proposed WLS offering:

§	Advantages for consumers:
o	For those consumers wishing to obtain an already registered
domain name, the WLS provides:
§	A simple, fair, low-cost and easy to understand procedure for
acquiring deleting names, in contrast to the multitude of options
available today that have varying degrees of complexity and price and
that in practical terms are often not options reasonably available for
mainstream users
§	A 100% chance of registering a name if it is deleted, with the
attendant business certainty of being able to know whether one can or
should not go forward with business plans relying upon a domain name’s
acquisition
§	An alternative to dealing with speculators in the deleted name
market.
§	A process whereby WLS subscriptions are processed on a
first-come, first served basis.
o	For current registrants, the WLS provides:
§	Assurance that a domain name registration would not be affected
in any way.  A registrant will still remain the registrant of a domain
name indefinitely so long as it continues to meet the contractual
requirements of its chosen registrar.
§	Confidence that their domain name registration services would
not be affected in any way.
§	The option of further protecting a name against inadvertent or
negligent expiration through wait listing (Note:  such protection could
probably be obtained more economically by simply extending the
registration period.)
§	Complete freedom to continue to make names available in the
secondary market, as is possible today (e.g., auctions, person-to-person
transactions, etc.).

§	Advantages for registrars and registrar resellers:
o	The ability to offer increased certainty to customers interested
in registering currently registered names.
o	The ability to offer consumers a new service alternative in the
secondary market for domain names.
o	The option to offer added value to the WLS and thereby
differentiate their WLS offerings from competitors.
o	The opportunity to create a new, additional revenue stream:
first the subscription fee, second the registration fee.

§	Advantages for gTLD registries
o	Ability to offer registrars a service that would help impart
greater confidence to customers interested in securing names through the
secondary market.
o	Reduction in resources necessary to support transactions made by
registrars trying to register recently deleted domain names (Note: In a
recent 17-day period, VGRS estimated that nearly 1.5 billion
“transactions” (i.e., adds, modifies, checks, queries, etc.) occurred in
its systems in efforts by registrars to register just-deleted names.
That resulted in only 3,156 registrations, meaning that on average
465,399 transactions were made for every added domain name.)
o	The opportunity to create a new revenue stream

§	Advantages for intellectual property owners
o	Provides a low cost alternative to the current UDRP or other
dispute mechanisms for IP owners who simply elect to wait out a current
domain name registration  (Note: This could be likely in the event that
the current registrant is not actively using the name for commercial or
other activities.)
o	Maintains the integrity of the UDRP process.

4. Responses to criticism to the proposed WLS

Discussion of the concepts that led to this proposal began in September
2001 at ICANN’s meetings in Montevideo, Uruguay, in an open meeting
among registrars, registries and other interested parties.  Those
discussions continued on a list set up by the ICANN DNSO Registrars
Constituency (the “ICANN-Delete” list), and finally resulted in a
request for this proposal by that constituency.  As noted at the
beginning of this paper, VeriSign presented the original WLS proposal to
the Registrars Constituency on December 30, 2001.  Discussion of the
proposal has occurred on and off since that time.

A variety of arguments have been made in opposition to the proposed WLS.
The intent of this section of the paper is to provide brief VGRS
responses to some of the criticism.  First, responses are provided to
the formal feedback received from the Registrars Constituency on January
18, 2002.  Then responses to other arguments are provided.

4.1 Comments regarding Registrars Constituency Response to Initial WLS
Proposal

a. “The proposed wholesale price for the service is too high.”

VGRS initially proposed a WLS cost to registrars of $40 per annual
subscription with the following objectives in mind:
§	To allow significant room for registrar margins and still result
in retail prices that the market would bear – current retail prices are
increasing, and are in the $69 range at present.
§	To discourage abusive speculation that we believe is encouraged
by too low a price point  (Note: VGRS believes that the concern for the
mainstream customer is best addressed by not setting the price so low
that there would be, more frequently, a wider margin or gap, for
speculators, between a name’s WLS price and its fair market value.)
§	To recover VGRS’ investment and ongoing license costs in the WLS
even if the volume of subscriptions is lower than anticipated and if the
service is discontinued after a one-year trial.
Because feedback received from some registrars disagreed with our
assessment in this regard, we carefully reevaluated our pricing model to
attempt to address registrars’ concerns while at the same time
continuing positively toward the above three objectives.  The
adjustments made are detailed in the revised proposal.

Additional comments with regard to price are included in Section 4.2
below.

b. “There could be conflicts of interest between VGRS and the VeriSign
Registrar.”
VGRS understands the source of this concern but we would like to call
attention to the requirements in the ICANN registry agreements found in
Section 23 for .com and Section 3.5 for .net and .org along with
Appendices H and I of all three agreements.  We have diligently
fulfilled the equivalent access and organizational conflicts of interest
requirements contained therein and are fully committed to continue to do
so.  Representatives from our VGRS compliance office would be pleased to
provide registrars any information they like about our compliance
program.  Moreover, we openly invite registrars to present any evidence
of cases where VGRS is believed to have treated the VeriSign Registrar
any differently from other registrars with regard to the WLS or any of
our .com, .net and .org registry services.  Any such evidence received
will be appropriately investigated and appropriate action will be taken.

In addition to the existing safeguards that prevent favoritism toward
any registrar and to ensure equivalent access for all registrars,
VeriSign is also currently in the process of taking one more step to
further ensure separation of VeriSign Registry and Registrar functions.
This will involve additional organizational changes and it is
anticipated that further details of these changes will be announced in
the next few weeks.

c. “There will be incentive and award for speculators.”
This is one area for which VGRS confesses lack of understanding so it is
difficult to respond.  We do agree with the statements made by some
registrars that the WLS will not eliminate speculation.  At the same
time, as we said in the initial WLS proposal a higher price for wait
list subscriptions will result in a decrease in speculator activity that
is dependent upon low-cost acquisitions.  There is no empirical evidence
supporting the speculative conjecture that a higher price point for the
WLS will disproportionately encourage speculation.  To the contrary, we
believe that the closer to fair market price a subscription is sold, the
less likely it is that a speculator would purchase a subscription in
hopes of profiting from the spread between the WLS price and the market
price.  We accept that there is disagreement on this point and suggest
that the most effective way to evaluate the relationship is to collect
and interpret empirical data during the 12-month trial period.

VGRS definitely believes that the current methods for handling deleted
names provide incentive and awards for speculators.  As noted by a
registrar in the WLS discussions that have occurred during the last
several weeks, it costs registrars virtually nothing to repeatedly send
transactions to VGRS systems.  When a name is successfully registered in
this way, the registrar only has to pay $6 for a one-year registration.
The WLS as proposed would increase this cost significantly and therefore
has the potential of decreasing speculator activity.  It is not clear
how the WLS could increase speculator activity.

d. “Solving the Problem of the Rush to Register Deleted Names”
VGRS is in full agreement with registrars that the WLS does not solve
this operational problem.  We believe that the WLS could have an
incidental benefit on this problem but we recognize that the WLS is not
a solution for the deleted names issue.  In Chuck Gomes’ analysis posted
to the ICANN-delete list in the fall of 2001, he specifically stated
that VGRS would be willing to consider implementing the WLS along with
other steps to deal with the deleted names problems.  One of the
possible “other steps” suggested by registrars on that list was to make
the “batch pool” a permanent solution and to charge for access to that
pool.  We are not prepared to commit to making the “batch pool” a
permanent fixture but we are willing to continue making it available
free of charge as it is today until it is improved and more cost
effective measures can be implemented.

4.2 Comments regarding other arguments made against the WLS proposal

Numerous comments have been have been made regarding the proposed WLS
wholesale price to registrars, some of them based on the supposed
simplicity of constructing a “parallel registry” such as the WLS.  Over
the past five to six years, there has been no shortage of people who put
forth their opinions regarding how cheaply they could provide a
particular Internet service.  The same thing is happening with regard to
the WLS.  But none espousing their own cost theories on the WLS have any
factual data about what is involved in developing and implementing a
system that could be integrated into VGRS operations, and it is highly
unlikely that they have factored in the strict quality control processes
and the demanding reliability and availability standards that VGRS
requires of its registry services operations.  VGRS provides registry
services that are unmatched anywhere in the world on a scale unmatched
anywhere in the world and the WLS will be positioned side-by-side with
already existing systems and services at that same level of quality.  It
is our belief that there are too many commercial enterprises around the
world that depend on the critical services we provide to not offer the
best that is possible.  Does that mean it costs us more to implement the
WLS than if we let others do it?  Probably.

When first considering the WLS service, VGRS weighed developing the
system in-house versus licensing the technology.  For time-to-market and
resource availability reasons, VGRS decided to license some of the
technology that would be needed at the registry and to facilitate
registrars’ efforts in implementing the service for their customers.
VGRS selected SnapNames’ technology because it offered the most tested
technology available.  Could VGRS have procured a license for a lesser
price from other providers?  Perhaps, but it is unlikely it would have
met our high standards.  SnapNames pioneered Parallel Registry™
technology and have the widest experience in the industry with that
technology.

The WLS, using Parallel Registry™ technology, is a full-scale registry
platform that is equivalent in many ways to an operational registry.
Consistent with VeriSign’s long-standing technical reputation and
service, and SnapNames’ newer versions of the same, the new WLS registry
platform is also world-class.  The hardware is very similar in
specifications and performance, and all systems must go through a
rigorous quality assurance to verify that the WLS will perform as well
as the core registry.  VGRS required that WLS technology be identical to
its own core systems technology with respect to security, scalability,
support of diverse features and functionality, customer support and
administrative interfaces, and software development kits supporting a
broad range of registrars.  The WLS provides a completely separate
EPP-based API for registrar-registry communication.  The WLS must be
able to scale across thousands of connections and across many machines
without performance or reliability problems (all transactions through
the system require complex two-phase commits).

There have been several requests for VGRS to release its cost
information.  That information is VeriSign’s proprietary financial data.
It would be inappropriate to disclose such information based on common
business practices, based on the fact that it involves competitive
information, and based on the fact that it involves information that is
proprietary to our suppliers and partners.

Another misunderstanding is that the WLS would be a “monopoly” service.
VGRS has no ability to “control” WLS prices to consumers, in the
antitrust sense of being immune from competitive pressure.  Moreover,
with other gTLDs and ccTLDs now pervasive in the marketplace, neither
.com and .net registrations, nor a WLS subscription, are a necessity.
And there are alternative services that both registrars and consumers
may use instead of the WLS.

Some have criticized VGRS for trying to expand its services as the
registry for .com and .net.  Under its registry agreements with ICANN,
VGRS is the exclusive registry for all .com and .net Internet
second-level domain names and it provides these services under the
contractual relationships outlined in those agreements.  The WLS is
being offered at the registry level because a centralized WLS offers
more value and efficiency for consumers.  The fact is that offering the
WLS at the registry-level is the only way to maximize consumer value for
such a service.

Some have suggested it is “unethical” to offer “chances” at a name that
is already registered by someone else.  To have a guaranteed option on
some thing is to have something of real value.  There are numerous
analogous examples, from the securities industry to options on
screenplays.  The purchaser gets value by having the best, next, and
exclusive right to a good or service, as well as by foreclosing others’
right to that good or service.  This value is worth something to the
purchaser.  Given all the relevant facts, the purchaser is free to
decide how much it is worth and to act accordingly.

A few wondered if trademark owners would be negatively impacted by the
WLS.  It should first be pointed out that the risk of failing to renew
in case a name that was wait listed would be the same as it is today.
Registrants with either superior and preferential access (the status
quo) or a WLS subscription would get the name after its
expiration—trademark owners would undergo the cost and inconvenience in
getting it back.  As before, the best defense is through careful
custodianship of the name, either by renewing or pre-paying.  

The WLS would, however, offer trademark owners one form of protection
they currently do not have:  today, domain names that are in dispute are
often allowed to expire, with the trademark owner then being forced to
try to register it again, failing more often than not, and starting all
over with the dispute process against another registrant.  A WLS
subscription on the disputed name may be used as a safety net in such
circumstances, just as many litigants, courts, and even the U.S.
Marshall’s Service utilize SnapNames’ SnapBack™ for the same purpose.

We suggest to all concerned that the consumers’ interest, not those of
the speculators or those with a business model based upon superior
technological access, should come first.  If registrars want a larger
income stream from a legitimate service provided in a high quality
manner, we suggest that a one-year test of the WLS should be allowed.

> -----Original Message-----
> From: Jeff Williams [mailto:jwkckid1@ix.netcom.com]
> Sent: Tuesday, January 29, 2002 8:37 PM
> To: Gomes, Chuck
> Cc: 'ga@dnso.org'
> Subject: Re: [ga] Revised WLS Proposal
> 
> 
> Chuck and all assembly members,
> 
>   Chuck, is there a HTML format for this Revised WLS proposal?
> Or even a Text version?  If so, could you send it in either of those
> two formats, or provide a pointer/URL?
> 
> Gomes, Chuck wrote:
> 
> >    Part 1.1.1.1       Type: Plain Text (text/plain)
> >                   Encoding: 7bit
> >
> >
> 
> Regards,
> --
> Jeffrey A. Williams
> Spokesman for INEGroup - (Over 121k members/stakeholdes strong!)
> CEO/DIR. Internet Network Eng/SR. Java/CORBA Development Eng.
> Information Network Eng. Group. INEG. INC.
> E-Mail jwkckid1@ix.netcom.com
> Contact Number:  972-244-3801 or 214-244-4827
> Address: 5 East Kirkwood Blvd. Grapevine Texas 75208
>

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