Proposed Extension of Verisign's .com Contract Gets Heat From GOP Lawmakers, Industry

"It appears that the [DOJ] may be prevented from having meaningful input into the prices that Verisign charges for registering a domain name within the .com domain for an extended period” if the proposed .com registry agreement extension and IANA transition both occur as planned, Cruz and the other lawmakers said in a letter to Antitrust head Renata Hesse. A “thorough” competition review of the Verisign agreement is needed “before any oversight transition is undertaken and any agreement extension is approved,” they said. Consumers and other domain name stakeholders “will be ill-served by a process that precludes the DOJ from considering the appropriateness of Verisign receiving an extension of its critical monopoly control over .com for another six years.” The lawmakers asked the DOJ to respond by Monday, after our deadline. The DOJ didn’t comment.

A “robust” DOJ-led competition review “would allow the Government, policy-makers and, most importantly, the public, to assess Verisign’s pricing practices since the last review and to determine whether the current [$7.85] price cap is artificially high as some have suggested in the past,” the lawmakers said. ICANN’s proposed Verisign registry agreement extension doesn’t directly address the price cap, which was imposed in 2012. The cooperative agreement between Verisign, ICANN and the Department of Commerce allowing Verisign’s administration of the root zone file specifically imposed the price cap until November 2018 unless Verisign can demonstrate it doesn’t have “market power.”

But the lawmakers’ arguments in favor of a DOJ review because of the price cap “don’t stand up to scrutiny,” said Phil Corwin, principal of e-commerce and IP law consultancy Virtualaw. Much of Commerce’s cooperative agreement with ICANN and Verisign becomes void if the IANA transition occurs because oversight of the root zone file also would be spun off then, but the price cap would remain in effect, Corwin told us. The DOJ “retains its power under antitrust law” to monitor .com prices just as it monitors issues across a range of U.S.-based businesses, Corwin said. “I know there are people who think the price cap should be reduced, but this price cap is going to be in place for the next two years,” he said. “There’s plenty of time for Verisign to communicate with NTIA and DOJ before the end of the current cooperative agreement.”

A DOJ competition review also is needed given Verisign’s role in funding Nu Dot Co’s winning $135 million bid for the .web generic top-level domain (gTLD), the lawmakers said. “There is a strong belief within the domain name industry that Verisign’s bid to secure the .web registry may have been undertaken to protect its position in the .com market from additional competition.” ICANN’s late July auction of .web has spawned controversy, with Donuts challenging the results in the U.S. District Court in Los Angeles (see 1608090036) and Afilias asking ICANN to internally investigate its handling of stakeholders’ charges ahead of the auction that control of Nu Dot Co had changed hands. Those challenges mean that control of .web won’t be finalized for some time, and it’s unclear whether .web would become an “effective competitor” to .com if Afilias, Donuts or another of the .web applicants had prevailed in the auction, Corwin said.

Corwin and a domain name industry lobbyist separately questioned the motives of Cruz, Duffy and Lee for seeking the DOJ review, citing the trio’s vocal skepticism of the IANA transition. “Personally I think this has less to do with concerns about [the extension of the Verisign agreement] than it does with wanting to delay the IANA transition,” Corwin said. “They’re playing fast and loose with the facts in a bid to hold this up. I’d be surprised if the DOJ intervened in a way that would halt the transition from occurring.” It’s not clear how DOJ would handle the actual request for a competition review, a domain name industry lobbyist said.

Industry stakeholders didn’t address the price cap issue in their comments, instead focusing on other aspects of the proposed registry agreement extension. Donuts urged ICANN to require Verisign to institute the same abuse protections included in the agreements for both legacy TLDs and new gTLDs. “Thus, smaller, less resource-rich competitors must manage gTLDs laden (appropriately) with additional responsibilities, while Verisign is able to operate its domains unburdened from these safeguards,” Donuts said. “This incongruence is a precise demonstration of disparate treatment, and one that actually hinders effective competition and ultimately harms consumers.”

The Generic Names Supporting Organization’s Business Constituency and IP Constituency both urged ICANN to impose the same abuse protections on the .com registry agreements and other TLDs’ agreements. “The continued prevalence of abusive registrations in the world’s largest TLD registry is an ongoing challenge,” the IP Constituency said. “The terms of the .com registry agreement should reflect that reality, by incorporating the most up-to-date features that will aid in the detection, prevention and remediation of abuses.” The Business Constituency and IP Constituency both also urged ICANN to require Verisign to implement rights protection mechanisms that fit within ICANN-approved consensus policies given ongoing questions about whether legacy TLDs should be required to abide by the Uniform Rapid Suspension process and other RPMs.

Registry XYZ.com addressed the price cap issue from the context of its own business motives, saying it would lower the price of .com domains to $1 per year if it gained control of the TLD. “ICANN should not passively go along with Verisign’s selfish goal of extending its unfair monopoly over the internet’s most popular top-level domain name,” XYZ said. The Internet Commerce Association, which Corwin counsels, said it believes the registry agreement extension “will have no effect whatsoever upon the current .Com wholesale price freeze of $7.85 imposed on Verisign.”