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    Highlights of the ICANNWatch Archive
    (June 1999 - March 2001)

    Verisign/NSI Separation and Powers
    posted by michael on Wednesday April 11 2001, @02:10AM

    Surely one of the most incoherent and least well thought out arguments for the VeriSign deal was the claim that there was already plenty of competition in the registrar market, so registrar/registry separation wasn't important any more.

    This assertion was belied by VeriSign's ability to charge a monopoly rent -- it gets many renewals at way above the market price charged by most competitors, simply from inertia. And it is belied by the consolidation everyone expects in the registrar market.

    ICANN's main answer was to weakly (well, loudly) protest that flaws in the deal negotiated with NSI meant that right after it divested its legacy registrar it could open or buy a new one.

    Well, brace yourself for the equally large flaw in the new VeriSign deal. Recall that VeriSign got started selling digital certificates. It had about half that market, a share not unlike what it currently has of the gTLD registrations. It then bought its largest competitor, giving the new combined entity over 90% of the market.

    Q:What's to stop VeriSign buying up competitive registrars?
    See inside for answer -- plus a suggestion that there's a different, and more important, question you should be asking.

    A: Nothing?

    Well, maybe anti-trust law. (In the Bush administration? Pull the other leg.)

    So, what prevents VeriSign buying up major registrars? How about "almost nothing"?

    On the other hand, it's probably true that the barriers to entry - getting certified by ICANN and marketing/publicity - are a lower (although far from negligible) in the register market than they are in the market for digital certificates. That suggests that if Verisign were able to achieve a dominant position in the registrar market by buying up its competitors, it would be harder for it to hold onto that position, so it might conclude that it wasn't worth spending the money. But there's nothing to stop them from making the purchases if they decide they want to.

    The Real Issue

    One could even ask whether registrar-registry separation ever mattered that much in an economic sense. The biggest dangers were cross-subsidy, and especially the danger that the registry would manipulate its policies to favor its sister registrars. I have seen correspondence in which a major registrar charges VeriSign with doing exactly that, but have not received permission to make it public. (VeriSign hotly denied similar charges in Melbourne, and I'm not aware of a smoking gun on the public record, other than perhaps the relationship with its domain name reseller.)

    Be all that as it may, the bottom line is that none of us really knows how important registrar-registry separation is to the relevant markets, and that nothing which happened in the process leading up to the VeriSign deal shed much light on the issue. With the possible exception of Professor Amadeu Abril (who teaches European competition law, and who voted against the new contract), the ICANN Board is primarily composed of technologists leavened with a few intellectual property lawyers and businesspeople. This Board has little relevant expertise and even less right to decide on issues of market regulation.

    I have no idea if ICANN's decision on registry separation was right. I doubt it has a better informed view than I do, although it's clearly got a more emphatic one.

    What I am sure about is that ICANN should stick to "technical coordination" and leave market regulation to others. The real issue isn't registrar/registry separation. It's how to separate ICANN from economic regulatory powers. And it seems to me that it as it signs complex contracts with the new gTLDs, ICANN's regulatory powers will increase.

    Alas, there's no sign ICANN's institutional competence to deal with non-technical issues will grow above its current infinitessimal state, nor that its propensity to negotiate all the key issues of economic regulation in secret ("it's just contract, not policy") are likely to change. Beware.

    [To respond, or start a new comment thread, click the "Send Your Comment" button in the yellow box to the right.]

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    Separation and Powers | Log in/Create an Account | Top | 4 comments | Search Discussion
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    Re: Separation and Powers
    by lextext on Wednesday April 11 2001, @05:24AM (#509)
    User #6 Info | http://www.lextext.com
    Two things:

    First, the registrar accreditation agreements (Section S.1.) require ICANN's approval if the agreements are assigned or transferred. Certainly, there are many ways of acquiring a competing registrar that would not require "assignment" or "transfer" of the ICANN agreements, so this is not much of a solution. Depending on how the acquisition is structured though, ICANN might be able to use this as a hook to deny approval of an transfer of registrations that would have anti-competitive effects.

    Second, couldn't a more explicit provision in the registry and registrar contracts make clear that ICANN had the power to approve/disapprove changes of ownership? It could then use that power as a market regulator to ensure that no registry or registrar became a monopoly. I think the answer is "yes, you could do that." But do we really want ICANN to have the ability to regulate in this fashion? And if not ICANN though, who?

    -- Bret

    [ Reply to This | Parent ]
    Re: Separation and Powers
    by larry on Wednesday April 11 2001, @08:27AM (#510)
    User #2751 Info
    Verisign had already quietly purchased competitor Namesecure.com on or about November 2000.


    http://www.icann.org/melbourne/verisign-submission 29mar01.htm

    Not surprisingly, this was NOT publicized and is not mentioned on the Namesecure.com website. Infact the "about" link talks about Namesecure.com's humble start, and the "news" link doesn't mention it either. Why do you think that is??? Hmm.

    It wasn't mentioned in any Verisign press releases either even though there is no lack of other IMPORTANT news from their PR dept.

    I would imagine that when the Verisign agreement is approved by DOC, there will be a Verisign logo on the Namesecure site.
    [ Reply to This | Parent ]
    Re: Separation and Powers
    by cambler (chris@ambler.net) on Wednesday April 11 2001, @11:47AM (#511)
    User #36 Info | http://onthenet.ambler.net/
    If we are to believe ICANN, and specifically Hans K., the separation of registry/registrar is of paramount importance.

    Hans used it as the key argument of his desire to turn down Image Online Design's .Web application.

    Yet now we find that it's a non-issue?

    Isn't this a clear reason for IOD's reconsideration to be given an approval?

    Ambler On The Net [ambler.net]

    [ Reply to This | Parent ]
    Re: Separation and Powers
    by thnyc on Wednesday April 11 2001, @11:59AM (#512)
    User #2789 Info
    Since the VRSN registry is responsible for operational and technical issues, such as roll-out of the multilingual domains and related codepoints, NSI registrar customers have a real advantage over others that use competing registrars. During the past two MLD testbeds, competing registrars were not given sufficient time to test new codepoints before launch. This is just one example in which the combined entity has an advantage over other registrars. From a consumer POV, why use any other company when registering? In other words, why take a chance?

    Registry and registrar separation is vital to healthy competition among registrars.
    [ Reply to This | Parent ]

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