[registrars] Pandora's Box

["Michael D. Palage" <michael@palage.com>]

Hello All:

I just wanted to share with everyone a potential slippery slope we as a
constituency may be embarking upon in connection with redemption grace
period, WLS, transfer etc. Many of you may be familiar with the old adage
"be careful what you ask for, because you might actually get it." I think we
need to take a brief pause to see where our actions may be leading us,
because the destination may not be a pleasant one.

The slippery slope that I am specifically concerned about is the growing
demand list that we are potentially imposing upon registries within the
context of ICANN policy. My concern is based upon the registry contracts
which the registries have with ICANN.

.COM Registry Agreement:

22. Price for Registry Services.

A. The price(s) to ICANN-accredited registrars for entering initial and
renewal domain name registrations into the Registry Database and for
transferring a domain name registration from one ICANN-accredited registrar
to another will be as set forth in Section 5 of the Registry-Registrar
Agreement (attached as Appendix F). These prices shall be increased through
an amendment to this Agreement as approved by ICANN and Registry Operator,
such approval not to be unreasonably withheld, to reflect reasonably
demonstrated increases in the net costs of providing Registry Services
arising from (i) new or revised ICANN specifications or policies adopted
after the Effective Date, or (ii) legislation specifically applicable to the
provision of Registry Services adopted after the Effective Date, to ensure
that Registry Operator recovers such costs and a reasonable profit thereon;
provided that such increases exceed any reductions in costs arising from (i)
or (ii) above.

.BIZ/.INFO/.NAME Registry Agreement

4.4. Pricing Adjustments Arising from New or Revised Specifications or
Policies. The maximum prices stated in Appendix G shall be increased through
an amendment to this Agreement as approved by ICANN and Registry Operator,
such approval not to be unreasonably withheld, to reflect demonstrated
increases in the net costs of providing Registry Services arising from (A)
new or revised ICANN specifications or policies adopted after the Effective
Date, or (B) legislation specifically applicable to the provision of
Registry Services adopted after the Effective Date, to ensure that Registry
Operator recovers such costs and a reasonable profit thereon; provided that
such increases exceed any reductions in costs arising from (A) or (B) above.

If you look at these contracts you will see that any new ICANN policy
provides the opportunity for the registries to raise their fees. Now before
the accountants on the list start talking about net benefit, net costs and
reasonable profit, let me give you a little history lesson about how the
current $6 fee was arrived at. During the test bed period the actual cost
was $9 per domain name year. Where did the $9 fee come from? I was "told"
that the DoC told NSI that the registry cost should be a single digit fee.
So guess what single digit fee NSI choose :-) Now when it came time to
calculating the current fee I was also told that there were numerous
calculations all over the place. If I remember correctly, NSI put the
initial cost of the SRS at around $25 million dollars. After looking at a
bunch of conflicting accounting numbers, the magic $6 price point was
arrived at. The moral of this history lesson, when you look at the terms of
the contracts and the way accountants can present numbers, it would be very
difficult for ICANN not to grant a registry fee increase if the registry was
able to present a valid case for increased costs associated with a new ICANN
policy.

The question that now needs to be asked is what would VeriSign or the other
registries do when confronted for the first time with a new requirement
mandated by ICANN policy. I would submit that it would set a dangerous
precedent to start doing things for free. Now maybe I am wrong. Perhaps the
registries are going to incorporate the redemption grace period, transfers,
etc with no additional fees. But do we have a guarantee that there will be
no fee increase - no.

To test my theory I have forwarded a copy of this email to the registry
constituency chair Jeff Neuman, to ask if there are any registries that
would come forward and state on the record that they will not increase fees
in connection with any redemption grace period, transfer or payment policies
mandated by ICANN. Hopefully I am wrong, and I will receive eight emails
from all of the registries but I will not be holding my breath.

Now before I am crucified as being a registry puppet, the point I am trying
to make is that registrars and registries must work together in solving
industry problems in a mutually agreeable fashion. In any adversarial
situation we are likely to lose because they have a contractual "right" to
raise prices in connection with new ICANN policy - we don't.

I just thought some of the newer registrars would find this registry
contract primer enlightening.

Best regards,

Mike