[ga] The Verisign agreements

[Kent Crispin <kent@songbird.com>]

[I forgot to send this a while back...the discussion continues, so here it 
is.]
On Sun, Mar 04, 2001 at 10:21:58PM +1300, DPF wrote:
[...]
> >Note I said "effectively".  Read 22 (e).  If NSI is not selected, they 
> >can take ICANN to court.
> 
> I am aware of that.  But changing the language from a "shall not be
> disadvantaged by being the incumbent"to "shall have a presumption
> their contract will be renewed" is a pretty damn significant change.  

I'm not sure that it is anywhere near as significant as you claim.  I
consider the threat of court action as a very serious lever -- remember
that NSI would be defending its cash cow, and, in the brute economics of
the situation, it can afford to spend all its profits from the registry
in a legal battle to keep the registry, because if it loses the
registry, it loses that profit stream anyway.  This is many millions of
dollars spent on clever lawyers attacking ICANN on any technicality they
can dream up, and ICANN will necessarily spend lots and lots of money 
defending against it.

The "shall have a presumption" language is not in the contract, it is in
the staff's explanatory blurb.  The relevant language in the contract
(http://www.icann.org/nsi/proposed-com-registry-agmt-01mar01.htm) is in
section 25.  There is a great deal of legalese in this section -- I 
think it is a fair assessment to say that there is a presumption that 
NSI will keep the registry.  But I think it is a fair assessment to say 
that there is a de-facto presumption that they will keep all three 
registries in the current agreement.

> Under the existing contract, even if the registry remains with
> Verisign, it means they have to sharpen their pencils enough at each
> renewal so that they can have a case to argue that they should keep
> it.  Merely having an open tender (even one likely to stay with the
> incumbent) will encourage the incumbent to make as good an offer as
> possible.

To some extent.  This effect is mitigated to some (perhaps large) degree
by the threat of a lawsuit, as I outlined above.

> >> So let's be very clear - NSI after 2007 has to compete against other
> >> entities to remain the registry.  If they can not provide the best
> >> price and/or service they have agreed that they may lose the registry.
> >
> >fat chance.
> 
> That is in the agreement.  They can of course argue it in court but if
> for example they have insisted if they have the contract renewed that
> they can charge $8 per name and a competing bid said they can do it
> for $3 a name then ICANN would be on fairly strong ground to go with
> the competitor.

Yes...after spending $30 million defending a lawsuit.  

> >> Now this is totally changed in the staff proposal.  D(4) states that
> >> there shall be a presumption that NSI keep the *.com registry for ever
> >> and ever as long as they comply with the agreements.
> >
> >It's a little difficult to follow, but I read that as a single renewal.  
> >The contract doesn't say anything about "perpetuity".  But it is 
> >legalese, and I don't know if I fully understand it.
> 
> They don't say in perpetuity"but by not having an expiry date or
> maximum number of renewals, this combined with a "presumption" of
> renewal will have much the same effect.
>
> What worries me about this proposal is it is effectively a one way
> step.  Sign this and ICANN have committed themselves for good - no
> turning back.

There *are* grounds under which the contract would not be renewed.  In
particular, if there was any evidence of collusion between the registry
and the registrar, that would be a material breach of the agreement. 
There is still the matter of fighting a potential lawsuit, though.

> >> By 2007 the *.com registry could be in the hundreds of millions and a
> >> competitive tender for the registry service could see massive price
> >> reductions from the current US$6.
> >
> >Possibly.  Another quite reasonable scenario is that robust competition
> >at the registry level will have altered the DNS landscape beyond
> >recognition, and .com will be a boring and passe place where all the
> >good names are taken.  The fact is, you are just guessing. 
> 
> Indeed - I am well aware it could dry up.   That is why I am hesitant
> about endorsing a deal with a "presumptive"right of renewal for ever.

Sorry, I don't understand.  If registrations in .com dry up, why do you 
care if NSI gets to renew forever?

[...]

> >In any case, I don't think there is a snowball's chance in hell that 
> >Verisign is ever going to lose .com, under either scenario, unless they 
> >want to give it up.
> 
> There we disagree.  If there was no chance of losing it under the
> status quo why would they be so willing to spend literally hundreds of
> millions of dollars and give away *.net and *.org so that they gain a
> "presumptive"right to renew it.

That is very easy to answer: Indeed *if they do nothing* there is a
chance they would lose the registry.  But they aren't going to do
nothing -- in fact they will do whatever it takes to keep the registry. 
But doing what it takes to keep the registry could conceivably cost them
lots of money -- not just court costs, but in lost business, lost market
value in their stock price -- all kinds of ways.  There is great
potential monetary value in the stability the new agreement offers them. 

So, the fact is that they will keep the registry regardless, but under
the new proposal, all things considered, they think they will make lots
more money.  In fact, both scenarios are incredibly sweet deals for NSI,
and, on a personal level, I find it very annoying that they have such a
privileged position.

But really, the advantages that accrue to NSI are a secondary concern --
many of the issues with .com are going to hold *regardless* of who is the
contractor: the customers will remain locked-in, .com will retain a
cachet and mystique; the cash cow will continue to squirt milk; and it 
would be very naive to think that *any* company who is put in that 
position is going to refuse to use these advantages.

-- 
Kent Crispin                               "Be good, and you will be
kent@songbird.com                           lonesome." -- Mark Twain
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