August 16, 2003
VIA OVERNIGHT MAIL, EMAIL, AND FACSIMILE
(310) 823-8649 (fax)
Mr. Paul Twomey, email@example.com
Internet Corporation for Assigned Names and Numbers (ICANN)
4676 Admiralty Way, Suite 330
Marina del Rey, CA 90292-6601
Re: WLS Marketing Restriction
Dear Mr. Twomey:
Inc writes to express its view concerning Network Solutions’ (NSI’s) letter of
August 14, 2003 concerning Condition (c) of the VeriSign proposed Wait List
Service (WLS). NSI’s proposal of a
marketing restriction limitation during a blackout period will not remove the
unfair competition in selling WLS subscriptions and the preference WLS provides
that advantages larger registrars.
ICANN board's stated
purpose of Condition (c) is “[in order] to avoid an incumbent registrar
acquiring a preference in obtaining a WLS subscription through advance
knowledge of or control over the deletion of a domain-name registration, there shall be appropriate limitations on that
registrar's ability to obtain a WLS subscription on any domain name that it is
concurrently sponsoring in the registry”
this letter, I will show that NSI’s marketing restriction proposal (see 
below) does not maintain the ICANN board’s intent to avoid an incumbent
registrar from acquiring a preference and it does not impose any limitations on
that (or any) registrar’s ability to obtain a WLS subscription, which is also contrary to the board’s
VeriSign’s originally proposed WLS provides a
preference to large registrars. In an
effort to remove this preference, the board passed a resolution that would bar
the registrar-of-record from obtaining wait list subscriptions on certain names
during a blackout period.
NSI’s proposal attempts to remove the preference by
limiting the marketing practices of the registrar-of-record so that even though
the registrar has the preference (granted to it by the existence of WLS) it
would presumably not be able to utilize it because it would not be able to say
it had an advantage. Unfortunately, a
registrar does not have to perform any marketing whatsoever to show that it can
offer WLS for less risk (and thereby utilize its advantage), it could just
lower the price to below cost. For
example, to show the consumer that the registrar is certain that a WLS will
“ripen”, the registrar will offer WLS for zero cost (in other words, it will
assume the risk itself, when it, and only it, knows there is none).
Since the marketing restriction does not restrict
the prices at which WLS can be offered, the registrar could say, “buy WLS on
this name for $0, and when it ripens pay $30: that’s how much I believe it will
Due to the zero price, any WLS consumer would know
that this particular registrar believes that this name will surely ripen, hence
no marketing message is required. To
indicate that there is less risk, though not certainty in the name being
deleted, the registrar could lower the price to say $5 (proposed WLS
subscription cost is $24, then $6 if it ripens), and then if it ripens the WLS
holder would pay $25 ($24+$6=$30-$5=$25) (see  below).
Even with a complete and total restriction on
information disclosure (marketing or otherwise) by the registrar, the preference
still remains if there are no restrictions on obtaining WLS subscriptions
during certain periods, and the registrar can disclose the information merely
by setting a price. So a marketing restriction, in this case, does not serve
So, unless ICANN mandates WLS pricing, any
marketing restriction is useless, but still, there are other problems with
NSI’s proposal, namely in enforcement and disclosure, which I’ll explain next.
NSI proposal is difficult or impossible for the registry (or ICANN) to
enforce. The registry has no incentive
to enforce it because at least it will sell the same number of WLS
subscriptions both ways (enforced or not), and possibly more subscriptions if
not enforced. Besides that, ICANN has
no resources to enforce it. It will be
very difficult to monitor the marketing messages of each registrar.
proposed a carve-out so that the marketing restriction does not apply to
“computer-generated responses resulting from an end-user accessing Registrar's
Web site independent of Registrar's targeted Wait List Service specific
advertising and promotional efforts”.
Even if the rest of the proposal was not worthless, with this carve-out
the registrar could then simply place any marketing messages in such
computer-generated responses, which would totally negate the purported purpose
of the entire proposal.
there is no need for the registrar to mention (or market) the exact deletion
date, as the NSI proposal restricts.
Registrars just need to relay that it will be deleted, and what better
way to do that than assume the risk that it will be deleted? So having a restriction on mentioning
deletion dates serves no purpose. If the price is zero, the purchaser has a
pretty good idea that the registrar is sure the name will be deleted, because
the registrar is putting its own money at risk if it does not ripen.
as written, the registrar of record can disclose the information of which names
have been renewed (a simple difference will tell you which names will be
deleted, since the set off all names is known for each registrar), since NSI’s
marketing restriction does not prohibit disclosure of domain names not subject
to the Black Out Period (NSI’s definition), and the ones that have been renewed
would no longer be in the Black Out Period.
Next, I also wish to point out that there are two
dimensions to the board’s ratified WLS restriction, and then discuss both in
relation to NSI’s proposed marketing restriction:
1) Registrar application: Does any restriction apply
fairly across all registrars? Does it apply to only the registrar-of-record or
to all registrars?
2) Period: What is the period? What is the start time,
end time, and in relation to what other date, deletion or renewal?
Fair across all registrars?
NSI rightly points out in their letter in section
I.b and I.c that any restriction that only applies to the registrar-of-record
in obtaining WLS on its own names (or, I assume, restricting its marking
practices) would be unfair to that registrar.
This is one reason why the blackout period must extend to all registrars
equally. Another reason is that if the
rule applies only to the registrar-of-record, the registrar-of-record could
disclose or sell the information to other registrars and thereby benefit from
the preference granted to it by a restriction-less WLS. An appropriate blackout period that applies
to all registrars evenly would eliminate the preference entirely from the WLS
What is the Period?
If NSI’s proposal passes,
NSI, for many names (sometimes more than 20,000 .com and .net names per
day, and on average many thousands per day), can say to its customers:
“The WLS on this domain
costs $0, you pay me $30 if it is deleted (which I, and only I know it will be)
and you obtain the name”
During the 45-day
auto-renew period, it can then delete the name the instant the WLS is
purchased, and then collect $30 risk-free when the name is assigned to the WLS
holder. Obviously, NSI, or any other registrar, would not make this offer on
all possible names, only on names that it knows it will delete. Just as obviously, if NSI made this offer,
rational consumers will flock to NSI as it would be the registrar that offers
the most wait list subscriptions at zero up-front prices, and no risk of losing
$24 if the name does not delete.
Sure its possible for the
other registrars to offer WLS for $0, but they would be taking a huge risk in
doing so, because only NSI knows that the name can be, and will be,
deleted. If the other registrars made
that same offer for the WLS on that same name, they’d be stuck with a $24 loss
to the registry when the name did not delete. Since no other registrar knows it
will delete for sure, no other registrar will make the offer and therefore WLS
gives NSI, or any large registrar, a preference on re-registering the names for
which it is the registrar-of-record.
A preference it does not enjoy today.
The Period Before
NSI or for that matter,
any registrar, can make this offer on its names that are before
expiration because it (and only it) knows which names have already been
renewed, and therefore which names have not.
Those that have not been renewed have a much higher likelihood of being
deleted; therefore it can offer WLS on those names at less risk, though not zero
risk, than another registrar can.
Therefore before expiration the registrar with the larger number of
names has an advantage over those with lesser number of names.
So, if the current date
is just before the expiration and the name has not been renewed, the registrar
knows that very likely the registrar will be able to delete it on the day of
expiration. Here are two examples to
day before expiration, 99.9% of the eNom names that are not renewed the day
before expiration are not renewed by the day of expiration (the next day in
this case), and can therefore be deleted.
30 days before expiration, about 50% of eNom’s names have already been
renewed. ENom’s total renewal rate is
about 60%; therefore more than 80% of the eNom names that are not renewed 30
days before expiration are not renewed by the day of expiration, and can
therefore be deleted on the expiration date.
Therefore, for any names
that are within the period 30 days before expiration, eNom can say with at
least 80% certainty that the name can and will be deleted at expiration. eNom is not a unique case; all registrars
have just about the same profile, because all registrars have a financial
incentive to get registrants to renew well in advance of expiration. To put it in another way, any registrant
that has not renewed 30 days before expiration, in all likelihood, won’t renew
at all, and those names will be free for the registrar to delete a short time
percent means 1 in 5 will renew, therefore, at any time after 30 days before
expiration eNom can offer WLS knowing that 1/5 of each $24 will be lost to the
registry, so during this period, it can offer the WLS for $4.80, and the name
for $30 when it ripens (total in=5*$4.8+4*$30=$144 equals total out=5*$24+4*$6=$144,
again see  below). After expiration,
without a restriction in place, we’d be able to offer WLS for $0 and the name
for $30 when it ripens. NSI can offer the same low prices but on more names,
even with NSI’s proposed marketing restrictions, which is the crux of the
problem. A registrar with no
deleting names cannot offer low price wait list subscriptions (with the same
risk of ripening) at all.
Its true, as NSI says in
their letter, that for names where the current date is before the expiration
date of the name, that the registrant knows first whether or not the
name is to be deleted, but the point is that the registrar knows second,
and before any other registrar.
No matter what the registrant’s wishes are, since the
registrar-of-record performs all deletes, the registrar-of-record knows before
any other registrar which of its names will be deleted. And certainly for names where the current
date is after the expiration date, the registrar knows even before the
registrant the date the name will be deleted. There is no way around this.
Even if the registrar was forced to disclose this information, the
registrar of record knows it first. It knows first for any and all the names it
deletes. Therefore, once the registrar
knows this information first, a claim concerning knowledge of the deletion date
in any registrar's marketing material is very much valid, contrary to what NSI
The Period After
After expiration, the registrar’s job is even
easier. Any registrar, including NSI,
can offer WLS on those names with certainty that the name will be deleted,
because as soon as a WLS is placed on the name, the registrar can delete
it. There will be no chance for the
registrant to renew the name after the WLS is placed on it because the deletion
will be instant. And even if it wasn’t instant, there is little chance the
registrant will renew anyway, because very few names are renewed after
expiration as it is.
Also, the risk that the
registrant will redeem the name after deletion is so small as to be
negligible. Of all the names for which
a registrar sends the delete command, only a very small percentage of them are
subsequently redeemed during the redemption grace period. Also, there is no requirement for a
registrar to actually redeem the name, or at what price to offer this service
to its customers. The registrar could
choose to offer that service at a very high price for names that have had wait
list subscriptions placed on them by the registrar. It could choose not to offer that service at all. So contrary to NSI’s letter, that would
make it 100% beyond-a-shadow-of-a-doubt certain that the name will actually be
deleted and go to the WLS holder if the delete command is sent to the registry
by the registrar. Since during the 45-day
auto-renew period the delete command will be sent immediately after the WLS is
sold, it is then absolutely certain at WLS purchase time that the WLS purchaser
will be awarded the name.
NSI can make both of
these offers (before and after expiration) even with NSI’s proposed marketing
restriction simply by adjusting the price to some level below cost and making
up the difference when the name ripens.
These are the reasons why
the board wisely chose to restrict the registrars from obtaining a WLS during a
blackout period relative to the name’s deletion. One issue, though, with the original condition (c), which
VeriSign pointed out in their reconsideration request, is that it is difficult
for the registry to ascertain before a WLS is purchased if that name will be
subsequently deleted. Therefore, if the
registry desires to offer a more straightforward customer experience, the
blackout period must be centered on the scheduled expiration
date, which is well known by the registry, the registrars, and the public, so
there will be no confusion.
Because 1) most names
renew before expiration, and 2) the registrar has the foreknowledge and near
certainty of deletion of any names not renewed during that period, and 3) after
expiration the registrar has the foreknowledge and absolute certainty of
deletion of those names that have not renewed, and 4) to be fair across all
registrars, then ICANN must not allow any registrar to obtain a WLS on a
name during a “blackout period” and that the blackout period must begin at
least 30 days before expiration and, to maintain perfectly even competition,
extend all the way through redemption, the RGP, and the “pending delete”
periods, for a total of 80 days after expiration. Otherwise, if the ICANN board ratifies a marketing restriction
instead of a limitation on obtaining wait list subscriptions, since NSI has the
most names, NSI will be granted the greatest advantage in selling WLS.
This proposal is
absolutely the most targeted, narrowly, and well-defined period that removes
the preference, and provides exactly even and fair competition among
registrars. This proposal is not overly broad. A WLS can be sold on any name for which
there is little or no advanced knowledge of its deletion (any name outside the
blackout period), which on any given day, is the vast majority of all the names
in the registry. The proposal is simple. It is not confusing. It is very easily
enforceable since the registry would, simply and easily, block the sale of WLS
on names in the blackout period, much the same way as it blocks the sale of
registrations for names that are already registered or would block wait list
subscriptions for names that are already subscribed. Third party enforcement is
not required. And incidentally, a blackout period that applies equally to all
registrars (not only the registrar-of-record) removes 1) any consumer confusion
regarding a registrar’s ability to obtain WLS while another registrar cannot
and removes 2) the inequality of large registrars in selling WLS on their own
names (NSI’s objections I. b and I. c are both removed if the blackout applies
to all registrars).
A “marketing restriction”
does not work. The original board intent, which is to place appropriate limitations on registrars in obtaining wait list subscriptions,
NSI’s proposal is:
agrees that during the Black Out Period for a domain name, Registrar shall not
engage in Active Marketing specifically targeted to selling a Wait List Service
Subscription for such domain name. For purposes of this Agreement, Active
Marketing means the distribution, dissemination, posting and/or circulation by
Registrar, or its agent(s), of advertising or promotional material that (i)
references the domain name subject to the Black Out Period and claims to offer
a superior Wait List Service, or purports to have an advantage in securing a
Wait List Service Subscription for an end-user; or (ii) includes the date that
Registrar will delete the domain name subject to the Black Out Period. For the
avoidance of doubt, the Parties agree that Active Marketing shall NOT include
computer-generated responses resulting from an end-user accessing Registrar's
Web site independent of Registrar's targeted Wait List Service specific
advertising and promotional efforts.”
 Time value of money, waitlist subscriber credit
risk, and profit are left out, to keep the examples simple.