ICANN’s Deal Could Prove Costly

As more registrars digest a proposed settlement deal between VeriSign and the Internet governance body ICANN, at least one is feeling some heartburn over higher rates they could be facing.

VeriSign and the Internet Corporation for Assigned Names and Numbers (ICANN) settled VeriSign’s antitrust lawsuit this week, and in the process approved a proposed deal that provides an improved framework for new registry services.

ICANN is taking public comments on the settlement agreement until mid-November and will make a final determination after public comment has come in.

Some registrars, the companies that reserve domain names for Internet publishers, are already weighing in on the deal, which, in part, extends VeriSign’s management of the popular .com TLD beyond 2007 to 2012.

Take the blog of Ross Rader, director of innovation and research at Canadian registrar Tucows: Beneath the link pointing to a story on the agreement is the picture of a collection of screws.

He said registrars are unhappy with one of the proposed changes to the existing .com agreement because it raises the amount VeriSign can charge for registry services related to new or renewed domain names. The charges sent down to the registrars will likely pass down the consumer.

Currently, registrars pay VeriSign $6 to pay for registry services related to setting up or renewing a domain name through .com every year. The agreement as it stands now lets VeriSign increase the fee it charges registrars up to 7 percent every year through the term of the contract. By 2012 the base cost for every new or renewed domain name would hit $9, if VeriSign chooses to do so.

“In the past it took [ICANN board of director] approval to do something like that and now the board would be granting VeriSign unilateral decision-making ability to raise the price up to 7 percent a year,” said Jay Westerdal, president of domain consulting firm Name Intelligence.

The fee clause in the contract is something you don’t find in other registry agreements negotiated by ICANN. Although prices could skyrocket for .com names if the agreement passes muster, many are making do with much smaller fees.

The fee structure for new and renewed domain names with the other TLDs under ICANNs purview include:

  • .net – $4.25, through controls are eliminated on Jan. 1, 2007
  • .org – $6
  • .info – $5.75
  • .name – between $5 and $6, depending on volume
  • .biz – between $4.75 and $5.30, depending on volume
  • .pro – $6

As such, the price hikes have some calling on ICANN to put .com up for rebid. With competitive bids, they say, the registry fees will be lowered to help the bidder win a new contract for the most popular domain extension on the planet.

That’s not an option, said Paul Twomeny, ICANN president and CEO, so the organization is forced to negotiate with VeriSign for .com from a different perspective.

The contract for .com signed by VeriSign and ICANN in May 2001 allows VeriSign to automatically renew its contract in 2007, unlike the contracts with VeriSign for .net and .org, which called for competitive rebids. The Public Interest Registry (PIR) took control of .org in 2003, while VeriSign came out on top of a rebid for .net earlier this year.

“We have to operate in the law of the land and the contract does not provide for [rebids],” Twomey said. “It’s always been a different negotiation position than it was, say, where ICANN has had to the power to put up and rebid .net [and others],” Twomey said.

There are four caveats to the existing .com registry agreement that would allow ICANN to put .com up for rebid: if VeriSign is in material breach of it registry agreement; if the company has not or will not provide a substantial service in terms of performance to the Internet community; if VeriSign demonstrates it is not qualified to operate .com; or VeriSign charges more for new and renewed domain registrations than the contract allows.

Twomey has been calling registrars since the announcement was made Monday, trying to get some feedback on the terms of the proposed agreement. He said that while they almost universally don’t care for the fees clause, they are generally happy with the agreement overall.

The fees might jeopardize the entire agreement, if registrars and enough Internet citizens complain. Taking the proposed fee structure out, Twomey said, would require ICANN to go back to the negotiating table with VeriSign.

VeriSign, for its part, doesn’t want to contemplate that outcome.

“We’re not going to speculate, we’re going to be hopeful that we can work through the process and outcome,” said Tom Galvin, a VeriSign spokesman. “That’s what our focus is on right now.”

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