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

["Peter de Blanc" <pdeblanc@usvi.net>]

This is a good point. Regardless of "status quo" or "new deal", VeriSign can
buy any company it wants to, or create one if necessary. Because of this
fact, it may make little difference in competition one way or the other.

If there are some more controls and benefits under "new deal", maybe we
should look that way.

peter de Blanc

-----Original Message-----
From: owner-ga@dnso.org [mailto:owner-ga@dnso.org]On Behalf Of Roberto
Gaetano
Sent: Thursday, March 22, 2001 2:23 PM
To: kent@songbird.com; ga@dnso.org
Subject: Re: [ga] Option A -- "Divestiture'


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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