Embittered Registrars Sue Embattled ICANN

A coalition of domain name registrars filed a lawsuit Tuesday against Marina del Rey, Calif.-based Internet Corporation for Assigned Names and Numbers (ICANN) seeking to block the launch of VeriSign’s global waiting list for domain names.

A group of approximately 23 URL registration companies calling itself “The Domain Justice Coalition” say ICANN’s approval of the proposed wait listing service, or WLS, violates ICANN’s terms of agreement with registrars and gives VeriSign an unfair advantage.

Under an agreement with ICANN, VeriSign keeps track of the registered owners of domain names that end in .com and .net. Registrars collect money from consumers (which can be either individuals or businesses), handle the digital paperwork involved in assigning them their chosen domains, and pay a $6 registration fee to VeriSign. Registrars compete with each other on price and promotions such as two years’ worth of registration for the price of one.

It gets trickier when a consumer wants a domain name that’s already taken. Many registrars offer what they call back-order services. For a fee, the registrar will keep track of when the desired domain name will expire and try to immediately register it for the customer.

Each day, domain names are deleted from VeriSign’s registry in a batch of about 25,000, according to Christine Jones, general counsel for GoDaddy, a coalition member. The registrars know the names that will be deleted but not the actual time the deletion will take place.

“We match up our back orders and try to get those names. It takes fractions of a second to go from delete to register,” Jones said. “Each registrar writes its own software that keeps pinging the registry. The one that happens to ping the registry immediately after deletion wins the backordered name.”

Because of this process, Jones told internetnews.com consumers often backorder the same name with multiple registrars. Registrars also buy desirable names that are names but not backordered with an eye to reselling them.

In March 2002, VeriSign asked ICANN to amend its registry agreements so that it could conduct a twelve-month trial of a proposed wait-listing. After receiving comments, it agreed.

“The board voted for it because they thought it was a boon to consumers,” ICANN spokesperson Mary Hewitt told internetnews.com. “This eliminates a ton of people pinging to see if the name is available at once. [As a consumer,] instead of me paying three different people to try to get a domain name I may not get, [with the WLS], if I don’t get it, I don’t pay any money.”

The proposed WLS would create a single backorder list and eliminate the competition between registrars for expiring names. The WLS would take only one order for an expiring name on a first-come basis. A consumer would still have to go through a registrar to check whether a name was waitlisted, but could find out immediately whether or not the name was coming available. Consumers would pay a proposed fee of $24 directly to VeriSign.

“The WLS service when we launch it will put the end user on an equal footing with professional scalpers,” said VeriSign spokesperson Christopher Parente. “They will know for certainty that if that name ever expires, they will get it.”

In September 2002, a lawyer for registrar Dotster requested that the board reverse its decision. In May of this year, the board declined to do so. In its recommendation on May 20, ICANN said that, “Arguments that a proposed new service such as WLS will displace existing services because it is more attractive to consumers do not demonstrate a threat to competition.” It noted that the registrar agreement states that “ICANN should promote ‘competition’, not competitors’.”

The coalition has another problem with the WLS: VeriSign operates its own registrar service, Network Solutions, a wholly-owned subsidiary.

“With the WLS,” Jones said, “Network Solutions has a huge advantage over our competitive process.”

Parente insists that the registrar is kept completely separate from the registry operation, but that doesn’t fly with the coalition.

“A wholly owned subsidiary’s financial condition rolls up to the parent,” Jones said. “Whatever Network Solutions does affects VeriSign.”

The stakes are huge. According to Jones, GoDaddy is the largest of 200 accredited registrars and registers about 175,000 names a month. Jones wouldn’t disclose how many backorders it receives, but said GoDaddy charges $18.95 for one year of service. While the coalition believes the WLS is anti-competitive, its lawsuit focuses on breach of the contract between ICANN and the registrars. That contract states that ICANN can’t change the terms without a consensus among the registrars. Jones said breach of contract is a much easier case to win. “Ironically,” she said, “the consensus goes the other way. It’s against the WLS.

The Coalition is seeking a ten-day restraining order prohibiting ICANN from allowing the WLS to launch, to be followed by a trial of its suit. Said Jones, “We’re hoping for just enough time to get the facts out.”

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