September 2, 2006

ICANN: When Contract Means Expand

Filed under: phone — Wendy @ 11:13 pm

ICANN has posted proposed registry agreements for the .org, .biz, and .info registries — contracts that would allow registry operators to raise prices arbitrarily or introduce tiered pricing, as well as giving incumbents a nearly-perpetual right of renewal. Strangely, given ICANN’s mission “to ensure the stable and secure operation of the Internet’s unique identifier systems,” the new agreements elevate the registries’ interests above the stability interests of domain name registrants. Under the proposed contracts, registrants would face considerable uncertainty about the future costs of domain name renewal.

I submitted comments, included after the jump.

Were I advising ICANN, I would advise my client against signing these contracts. Were I advising the public, I would advise my client to protest these proposed contracts (as many of the 430+ [now 800+] commenters apiece already have). Representing only myself in this comment, I write to point out a few of the most serious flaws I see in the proposed .biz/.info/.org contracts. (Because the three documents share the operative language, I submit this same comment to each of the dockets. If the numbering differs, I have used that of the .biz agreement.)

In the previous contracts for these gTLDs, ICANN has contracted for the offering of domain registrations at a price that was capped initially, uniform across names in the registry (except for bulk discount opportunities), and permitted to vary only to the extent that ICANN fees changed. ICANN was contracting for a known service, at known costs. Domain name registrants thus came to expect that they could establish online business and non-commercial presence at names in these gTLDs and renew those names for reasonably stable rates. These contracts, however, do not set prices or permit ICANN consensus policies to do so. They thus permit registries to raise prices uniformly selectively: only for high-value domains, only for renewal of existing domains, or at whim.

While there is some limited competition for initial registrations (limited not for technical reasons but by ICANN’s foot-dragging on opening new gTLDs), once a registrant has chosen a domain, he or she becomes relatively locked into that registry. Even if competition among gTLD registries restricted them from raising initial prices, it would not so limit their renewal pricing. Post-registration preferences become inelastic because a registrant now faces new costs and disruption of communications to change addresses (whether the cost is of sending out global “address change” messages, buying new stationery, or correcting national advertisements on the sides of buses). Opening the door to unlimited raising of prices and differential registry pricing, as these proposed contracts do, thus harms the interests of domain name registrants. Registrants who have established valuable presence at existing domain names risk facing higher prices at the whim of a registry operator. The stability of online identities is jeopardized, as registrants face uncertain renewal costs.

If the current holders of these contracts are not willing to continue entering names into databases and maintaining those databases for $6 or less an entry, it seems highly likely that other qualified bidders could be found.

I note that the existing contracts, unlike the proposed renewal contracts, all state that “the decision whether to accept the Renewal Proposal shall be in ICANN’s sole discretion.” Rather than accept the possibility of unilateral price increases, ICANN should exercise that discretion to reject these proposals and request new proposals (from the existing operators or would-be competitors) that continue to assure domain name registrants of reasonably constant-priced services.

Further, to preserve the renewal negotiations and the potential competition for renewal contracts as a check on registries, I would recommend dropping the “presumptive renewal” of 4.2. As the proposed contracts stand, even a registry that materially breaches its contractual obligations twice, and cures such breaches only upon court order, is contractually entitled to a renewal contract on terms comparable to those of similar registries. This arrangement leaves ICANN toothless to enforce its contractual rights long-term.

Given the public nature of these services, I would recommend removal of the “no third-party beneficiaries” clause, (8.7). Sadly, the public cannot rely on ICANN to represent public interests in domain name registration and use. Many would argue that ICANN is already in breach of its 3.2(a) obligation to “operate in an open and transparent manner.”

If I trusted ICANN more, I would also be concerned about the limited definition of “Registry Services” that ICANN is empowered to authorize, and the limited definitions of “Security and Stability.” (3.1. (d)(iv)(G)) Under the proposed contracts, it is not a valid objection to a registry’s provision of a new Registry Service (recall SiteFinder) that it harms the public interest, imposes unjustified costs on registrants or DNS users, hampers law enforcement, infringes trademark rights, breaches privacy rights, or imposes greater costs on the public than benefits. (3.1 (d)iv)(A)) Moreover, the contracts lock in procedures for approval of new Registry Services while a Policy Development Process on registry services is underway — short-circuiting ICANN’s ongoing public consultation on the subject.

Finally, I believe the provision permitting the registry to make use of traffic data, 3.1(f) deserves greater public consultation before adoption.

Domain name registries are a quasi-public resource: the public benefits from being able to register and use stable identifiers for its Internet communications. Leaving so much choice of price and service to the unfettered discretion of a privately controlled Registry under a 6-year contract, presumptively renewed, is against the public interest of domain registrants and DNS users.

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