[ga] WLS, Verisign, and Anti-trust

[George Kirikos <gkirikos@yahoo.com>]

(sorry if anyone got this twice -- I had some bad addresses in the
original, and fixed some typos)

Hello,

In regards to the upcoming teleconference on WLS by the Names Council
Task Force, I found it 

interesting to read the position of Verisign's Roger J. Cochetti at:

http://www.dnso.org/clubpublic/nc-transfer/Arc00/msg00183.html

in particular:

"The VeriSign Registry does not agree that its planned waitlist service
involves any new policy matters and consequently the VeriSign Registry
neither supports nor accepts a legitimate role for the Council, or its
task forces, to review its planned waitlist service. To the extent that
there are new policy matters raised by the waitlist service, they have
been neither identified nor justified."

I find that position very odd, but consistent once again with an
abusive monopolist seeking to circumvent the process whereby their
anti-competitive proposal has been soundly rejected by affected
stakeholders. In particular, it rejects the objections raised by Louis
Touton of ICANN at:

http://www.icann.org/minutes/report-vgrs-wls-17apr02.htm

"If, however, there are specific reasons to conclude that the
legitimate interests of others are likely to be harmed, then ICANN's
existing obligation to seek consensus whenever possible before acting
suggests that it should invoke the formal consensus development
mechanisms that currently exist prior to any decision by the ICANN
Board."

It has been pointed out on many occasions that there are specific
legitimate interests of others that are harmed by this proposal.

1) Other registrars who are actively pursuing domain drops -- I won't
rehash the list again, but by my count there are at least 30 registrars
currently pursuing expired domains, using a variety of business models,
leading to innovation and choice for consumers. They would be
specifically and negatively affected by the proposal. I don't pretend
to speak for other registrars, but I will believe Verisign has a
consensus support IF and ONLY IF registrars like Dotster (who run
NameWinner), eNom, Parava, AWRegistry, IARegistry, Registration Tek,
Signature Domains and the multitude of other registrars running their
own systems come forth in favour of WLS. The fact that Verisign
proposes a grandfather system which shows preferential treatment
towards SnapNames (its business partner on WLS), without compensating
other market participants is a further sign of specific harm caused by
WLS' impact as an intrusion on the market. There is no consensus
amongst registrars in favour of WLS, as pointed out in the official
position of the DNSO RC:

http://www.dnso.org/clubpublic/registrars/Arc01/msg02233.html

I recall one registrar describing WLS as a "bottom of the barrel"
option, when discussing alternative mechanisms for handling expired
names. If there's any consensus, it is that the "Status Quo" is the
best current option for all involved.

2) Impact on consumers -- the WLS has a specific negative impact on
consumers in 2 ways
a) reduced consumer choice -- this occurs because of the destruction of
competing business models (such as NameWinner's auction system, or
eNom's drop club system). In particular, under some existing systems,
consumers pay IF AND ONLY IF the domain is registered successfully on
their behalf. Under WLS, consumers pay Verisign irregardless of the
success of their Wait-List Subscription (e.g. if the current registrant
renews).
b) Higher prices -- increasing the WHOLESALE cost of names from $6 to
$35 is outrageous, and VGRS' only motive in this regard is a cash grab,
to replace lost revenues as its competitors take market share in the
main domain registration market. One need only look at Verisign's
recent stock price collapse as a signal that it needs new revenue
sources. It should compete in offering innovative products, and not
seek out another monopoly. Higher prices only positively impact one
party, and that is Verisign (and it's business partners), to the
detriment of all other market participants.

Verisign has tried to justify higher prices as a way to curb "abusive
speculation" by domain holders. However, that's only a myth propagated
by Verisign, who themselves, when challenged, admit they have no
authority in this matter (see answer to B.17 at:

http://www.verisign-grs.com/wls_responses.pdf

where examples of SnapNames registrations were listed.)

With regards to price, Verisign refuses to provide costing numbers,
given that they are  considered trade secrets. However, it is trivial
to consider how one can replicate WLS at low cost. Consider WLS as
simply a "shadow TLD". For instance, we have example.com as a domain in
the dot-com TLD. We can implement WLS by simply creating a "shadow TLD"
called dot-com1. Folks are free to register example.com1, for instance,
using similar models to today. The costs of implementing this new
shadow TLD are well known, either by Verisign's costs and/or the costs
of new entrants such as the registry operators of dot-info or dot-biz.
What is the ADDITIONAL cost to VGRS for implementing WLS, with this
shadow TLD? It is equal to the cost of implementing the following
pseudocode into their systems:

Current Code for Deleting Example.com:

10:  receive request from Registrar to delete Example.com
20:  put domain into 5/6 day deletion cycle
30:  delete domain

Proposed New Code for Deleting Example.com:

10: receive request from Registrar to delete Example.com
15: IF Example.com1 exists, register Example.com to holder of
Example.com1, and exit
20: (we only get here if example.com1 doesn't exist) put domain into
5/6 day deletion cycle
30: delete domain

So, essentially there is only *1* extra step (line 15) that needs to be
introduced into VGRS' systems, namely checking whether there is a
holder of the "shadow" domain in the shadow TLD, and if so registering
the name to that holder. I am willing to bet VGRS' programmers can
implement that extra line of code in 1 day, or 2 days tops.

How much does Verisign *really* expect to make from WLS, at the expense
of consumers? We need only look at the reports from their business
partner, SnapNames. See:

http://portland.bizjournals.com/portland/stories/2002/05/20/story5.html

(free registration required)

When discussing their recent layoffs, it was written:

"Wiener had said he expected that the WLS would bring in revenue of
$100 million to $150 million over the course of the 5-year contract."

This is *big* money, at the expense of consumers, registrars, and other
market participants. And that's only SnapNames' take -- you can be sure
Verisign would make a bundle too. VGRS wouldn't have the opposition
that it encounters now if they introduced a proper landrush period, and
charged $6 for WLS (the costs of the shadow TLD above). It's pure greed
on their part, thus the opposition to it. This is evident in their
answers to questions B.14 of:

http://www.verisign-grs.com/wls_responses.pdf

where they refuse to acknowledge the impact on other market
participants (if it's only a "test" as they suggest, part of that test
would clearly involve knowing ex-ante what the existing market is). The
only criteria of whether the WLS "experiment" is a failure is:

"If costs exceed revenue or if the demand for the service is not
sufficient to warrant continued investment, VGRS would have to
reconsider offering the service."

i.e. if Verisign makes money, it's a success. If it doesn't, it's a
failure! Spoken like a true abusive monopolist.

Even SnapNames acknowledges that the current market landscape is one
which is rich with competition, something that ICANN is supposed to
encourage (creating new monopolies is not ICANN's mission). From the
above article discussing the SnapNames layoffs:

"The launch of the WLS has been delayed, according to Cole, because of
sharp competition between domain-name registrars."

Verisign also appears to be continuing its misinformation campaign with
regards to as high registry loads as a reason for introducing WLS. Even
Louis Touton, in his April 17th letter above wrote:

"In the specific case of WLS, however, it is quite possible that some
of the technically harmful effects of the registrar-level services
(such as the high registry loads caused by "add storms") may justify
instituting a registry-level WLS."

This had been challenged consistently in the registrar community dating
back to last summer, yet Verisign has led ICANN to believe that this is
*still* an issue, when it is categorically false. It is proven to be
false by their own words, the answer to Question B.2 of the WLS
responses document, namely:

"Second, registry load is no longer an issue. The multiple pools and
rate limiting technology have solved that problem."

I think Verisign should apologize for continuing to perpetuate the myth
of registry load to the extent that Mr. Touton would even mention it
again, and stop misleading the good folks at ICANN and elsewhere that
load is still an issue. It was a red herring back in August of 2001,
and remains one today.

Verisign has also stated that they are not aware of any anti-trust
issues in regards to WLS. I'd like to ask them to publicly confirm or
deny whether they are currently under investigation for any anti-trust
matters, and in particular with relation to 1) WLS and 2) their recent
conduct with competing registrars and fake renewal notices (i.e. the
Godaddy lawsuit). For folks who've monitored these mailing lists, I'm
sure it is not a surprise that multiple complaints have been made to
the US DoJ and the FTC by numerous market participants in relation to
the anti-competitive behaviour of Verisign. Some might have also
noticed the decreased posting on these lists by Verisign
representatives and Snapnames representatives (provides free
"discovery" to those who are investigating things). I think ICANN and
other market observers who are making a decision with regards to WLS
would like to know, simply yes or no, whether Verisign is under
investigation with regards to their behaviour in these matters. The
arrogance displayed in rejecting the role of the Names Council is just
one more sign that they've gone too far in trying to force through this
cash grab. Just to show that the DoJ has a serious interest in these
matters, the bottom of this email includes the HEADERS of an email I
received from them (out of respect for privacy, I chose not to disclose
the contents of their private email). I think it's time for Verisign to
follow the principle of full-disclosure, before ICANN submits to these
blatant anti-competitive proposals.

I've cc'd the DoJ on this matter. Anyone with a further interest,
opposition, data, or material to submit to them should send it to:

NEWCASE.ATR@usdoj.gov

They know where to forward it, I'm sure.

Sincerely,

George Kirikos
http://www.kirikos.com/

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