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

[Jonathan Weinberg <weinberg@mail.msen.com>]

         Bret’s 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 Verisign’s 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 Verisign’s 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.  So the new Verisign reseller operation would need a 
new name.  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.  So Verisign’s reseller 
business would have to be a new business, not just NSI Registrar under a 
different name.  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.

         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.  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.

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

Jon


Jonathan Weinberg
weinberg@msen.com




At 08:58 PM 3/21/2001 -0800, Bret Fausett wrote:
>Alexander Svensson wrote:
> > ...the threat of a pseudo divestiture should probably be
> > looked at seriously.
>
>Picking up on this from the "[ga] Re: Board descisions" thread...
>
>ICANN posted four additional FAQs this evening focusing on what Verisign
>must do to obtain the four-year extension under the original agreement and
>what limitations, if any, might be placed on Verisign or the purchaser of
>the registrar assets after any sale.
>
>You'll want to review FAQs 4, 5, 6 and 7 from this:
>
>   http://www.icann.org/melbourne/info-verisign-revisions.htm
>
>I won't attempt to summarize the points made there, but many of the elements
>described by James Seng in an earlier post about what Verisign would do
>under Option A appear to be realistic possibilities:
>
>   http://www.dnso.org/clubpublic/ga/Arc06/msg01029.html
>
>      -- Bret

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