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Dotster's Comments on Verisign's Fraudulent Waiting List Proposal

To: Marilyn Cade, Chair, WLS Task Force
From: Clint Page
Date: July 10, 2002
RE: WLS Statement

Dear Marilyn,

With the ICANN Board Meeting in Bucharest now complete it is my understanding that the Names Council Task Force has until approximately the end of July 2002 to finalize its position regarding VeriSign's WLS proposal. As President of Dotster, Inc., I feel compelled to make one last attempt to outline our position relative to this proposal.

Dotster's position regarding the VeriSign proposal for a Domain Name Wait Listing Service continues to be one of total disagreement. The WLS proposal is Verisign's attempt to simply leverage its existing monopoly at the registry level to capture the innovative and highly competitive secondary domain market. VeriSign's blatant monopolistic posturing and the greed represented in the proposal will both restrict consumer choice and raise prices. The arguments for and against the proposal are myriad. However, we believe the issues distill themselves nicely into three very distinct areas: The consumer, the registrar and the registry.

The Consumer

  • The stated WLS proposal goes against one of the foundational charter issues that were a part of the creation of ICANN. Namely, the privatization of the DNS was intended to create an open market, whereby consumers would benefit from competition and lower prices. Part of ICANN's mission is to encourage competition and the WLS proposal is diametrically opposed to this precept.


  • The WLS proposal will put the consumer in the position of unknowingly purchasing a product that can never be delivered. In many cases, Verisign will be allowed to make money off an option that the consumer has no ability to exercise. For example, Verisign will be more than happy to sell a consumer a 'snapback' on a domain name for $24 per year- whether or not the name ever becomes available. The WLS concept is basically an option or "tax" that in many cases can never be exercised, and in it's worst form borders on consumer fraud.


  • VeriSign/SnapNames neglects to mention that under many competing systems, the consumer only pays for a name if it is successfully acquired. For example, NameWinner charges the customer only $25 on average per domain name, and only on those names that are acquired. In addition other resellers charge much less than NameWinner (e.g. $10/name at Tucows). One does not need to pay VeriSign/SnapNames $24/year, for a "chance" at a name, when it is much less expensive to go with a different firm and only pay for success.


  • Adoption of this proposal will create a monopoly for the secondary market component of the DNS. Monopolies, independent of industry, are famous for their abuse of customer service. This currently is an area where domain competitors work hard to differentiate themselves from one another. The customer is the beneficiary of this competition as registrars attempt to differentiate themselves by providing a broad array of tools and support systems directed at making the customer experience as pleasant as possible. This innovation and customer care will be lost in a monopolistic environment. One of the initial reasons for the breakup of the old NSI monopoly were complaints from the DNS user community regarding poor customer service.


  • The WLS pricing scheme is a centrally planned model, similar to what central planners did under the old Soviet regimes. The planners set a price based on what they thought was "fair", rather than allowing the market to set the price through competition. The Internet domain registration business operates most efficiently and effectively based on free-market principles. Better we should rely on a competitive marketplace to determine prices and valid business models, rather than a single monopolist. A competitive marketplace will always result in better prices for the consumer. Since that competitive market exists now, ICANN had better have a very good reason for interfering in it.


  • Adoption of the WLS will result in limiting the choices consumers have in the secondary market by destroying all of the competitive business models in this area.


  • The WLS proposal makes it more lucrative for a registrar to get a WLS subscription than to get a renewal from an existing customer. The implications involved in this factor may create an anti-consumer environment throughout the DNS. Registrars will be unwilling to allow a transfer of any domain name with a WLS subscription attached to it because of the potential revenue loss.


  • The recent public media announcements by SnapNames, (the technology provider behind the scenes) wherein they stated their annual revenues will increase from $3 million to $20 million in year one of the WLS arrangement, should give considerable cause for concern. If SnapNames is going to realize an approximate 700% revenue growth increase, what does VeriSign's piece of the action represent? The VeriSign Registry currently charges $6 for every CNO name registered. This rate was a negotiation point in the privatization process and was arrived at to ensure adequate margins for the registry. If VeriSign's registry can make adequate margins at $6 per registered domain name, then obviously one has to conclude that the proposed WLS pricing will be at the expense of the consumer.

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The Registrar

  • Competition will be stifled. Existing registrar competitors will receive the privilege of being resellers of Verisign services, instead of being allowed to innovate and differentiate as they do today. Registrars will be reduced to the role of gas stations with their sole supply of product coming from the Verisign monopoly.


  • The idea that the WLS will only be a "test" is completely false. Trying to suggest a "test", when your company would earn $20 million during that test, while completely wiping out existing competitors is not a "test." The Verisign/SnapNames proposal is simply an anti-competitive cash grab designed to eliminate competition and recreate the monopoly in the secondary market. None of the more than thirty existing secondary market competitors would still be able to run their business models under the WLS.


  • The WLS will interfere with free flow of transfers from registrar to registrar. If approved, the WLS will eliminate any domain from ever expiring from the Network Solutions database. The reason being that NSI will make more money controlling these domains while collecting WLS subscription fees. To make matters worse, there is no requirement that forces any Registrar to ever release an expired domain. In essence, the WLS will create a total domain lock down industry wide.


  • VeriSign's contention that the industry requires a more "ordered process" is another red herring. Why do we need an "ordered process", where Verisign/Snapnames would put existing competitors out of business and secure 100% of the market and profits for themselves? The WLS is simply Verisign's response to competition in the secondary market. As competitors such as eNom, NameWinner, NicGenie, IARegistry, AWRegistry, etc. have experienced success, Verisign has proposed a new monopoly in the secondary market to eliminate both competition and consumer choice.


  • Equal opportunity must be preserved to allow any registrar to acquire a deleted name, using any business model of the registrar's choosing, and not one forced upon them by Verisign registry. No current business model that is in place must be forcibly required to change their business model, unless it can be proven that they have caused the abuse through their choice of business models. Throughout the long WLS debate, neither VeriSign nor SnapNames have provided a single example of registrar abuse in this area.


  • Supposedly, the main reason that Verisign put WLS forth in the first place was to solve the "load issue." Now trying to argue, "it would be a valuable service for consumers" seems beyond the scope of Verisign registry. Is the Registry to become a Registrar? Let them do what they do best, which is to manage the database. However, innovation should take place at the registar level where there is a healthy and competitive landscape.

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The Registry

  • There currently exists an intrinsic demand for expired names within the competitive DNS market. How would Verisign/ICANN differentiate WLS demand from the intrinsic demand for the expired names themselves? This question would be particularly difficult to answer given that there would no alternative mechanism for securing those expired domains.


  • Verisign's initial comment that "the system load is too high" was a red herring to position them in the secondary market. By Verisign's own admissions "registry load is no longer an issue. The multiple pools and rate limiting technology have solved that problem."


  • VeriSign's price point for WLS is exorbitant. Although the company has clearly outlined its rationale for establishing the $24 price point, the stated costs of development, implementation, licenses and maintenance are all part of any new product offering. The recent launches of the new .biz and. info TLDs are examples of this process and both of these registries encountered similar costs in their respective introductions. Yet they were both able to deliver a product that cost the participating registrars less than $6 per domain name year registered. Dotster finds it inconceivable that creation of these registries was any less complex and/or costly than the establishment of the WLS service. Why the wide variation in pricing? In fact, Dotster has gone on record stating that we would be more than happy to operate the WLS registry for $6 per domain name.


  • When VeriSign states "getting paid fairly" as WLS justification, it confuses where the actual value resides. There is a fixed amount of value associated with the intrinsic value of the names themselves. WLS is not providing a valuable service; it is imposing a tax on the domain name. A competitive environment as currently exists amongst registrars and different business models will ensure that the consumers and registrars alike are getting a fair price.


  • If the courts end up determining that the WLS is indeed illegal, will Verisign/ICANN indemnify affected consumers, resellers, registrants and other market participants from all liability, legal costs, and implementation costs.

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Summary

Finally, I would be remiss if I did not mention the negative impact this decision would have on our small registrar business. Dotster's Namewinner product was the first domain name auction model for deleting domains introduced into the DNS and is a significant part of our revenue and profits. This product has been widely accepted and utilized by many customers, who also use competing products. In fact, a large percentage of our customers are also customers of our direct competitor SnapNames.

In the past year, Namewinner has signed 5,585 customer accounts of which 1,737 customers are actively involved in the domain auctions. Additionally, over 50,000 domains have been bid on and the total number of domain names won by these customers is over 32,000. To say that Dotster would be adversely impacted by the adoption of the WLS is an understatement. To allow a direct competitor (SnapNames) to partner with Verisign and create a monopoly in the secondary market goes against a fundamental charter of privatization of the domain name industry. I strongly urge you to vote against this proposal and allow open competition to continue to exist in the secondary market.

Sincerely,
Clint Page
President
Dotster, Inc.
11807 NE 99th St., Ste. 1100
Vancouver, WA 98682 USA
Tel (360) 253-2210
Fax (360) 253-4234

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