Information on Proposed VeriSign Settlement and New .COM Agreement
On 24 October 2005, ICANN and VeriSign announced that they had reached a proposed agreement to end their current lawsuits. The proposed settlement agreements have been posted for public comment, and are subject to final approval by the ICANN board. On 10 November 2005, ICANN announced an extension of the comment period to allow for comments at the ICANN meeting in Vancouver, Canada
As indicated previously, ICANN appreciates the comments and questions about the proposed VeriSign settlement posted in ICANN's public forum and raised in meetings with staff since the proposed settlement was announced. The following Q & A's (questions and answers) are intended to address key issues raised and support further dialogue and consultation.
ICANN will continue to review questions posted in the public comment forum and elsewhere, and will post additional Q&A as appropriate.
Initial Questions and Answers (from 24 October 2005 Announcement)
1. What does this mean for the lawsuits between ICANN and Verisign?
Pending public comment and full approval by the ICANN board, the proposed agreement settles many long standing points of tension between VeriSign and I CANN which have adversely affected the broader Internet community. It eliminates all pending litigation between the two parties, and - importantly for the community - more ICANN staff and resources can be devoted to ICANN's core functions, rather than to litigation with VeriSign over the terms of the .com r egistry agreement. In the future, in the event of a disagreement relating to the .com registry agreement, both sides will be able to make use of binding arbitration under the International Chamber of Commerce.
2. What does this mean for future registry services VeriSign might introduce?
The proposed agreement outlines a clearly defined process for the introduction of new registry services in .COM. VeriSign agrees that all new registry services will be reviewed by ICANN prior to introduction through a transparent, defined and timely process.
Under the proposal, VeriSign and ICANN are agreeing to clear definitions and processes for review that further advance the stability and security of th e DNS:
- VeriSign agrees to a new, clarified definition of registry services;
- VeriSign agrees not to make changes to registry services without prior notice;
- VeriSign agrees to put new registry services through an appropriate filter for competition, security and stability; this process strikes the right balance between innovation and business certainty and the need to ensure competition, security and stability in the DNS;
- VeriSign and ICANN agree to solid technical definitions of potential effects on "security" and "stability";
- A standing panel of International neutral technical experts will review proposed changes to registry services for potential security and stability issues;
- Competition issues will be referred to appropriate governmental competition authority/authorities; the proposed agreement clarifies ICANN's role a nd recognizes that determination of whether a registry's action is competitive or anti-competitive is an appropriate function of existing national bodies; and
- The agreement includes compulsory arbitration using the ICC (International Chamber of Commerce) in Paris, which is appropriate for an internationa l organization such as ICANN.
Additional Questions and Answers (Posted 21 November 2005)
1. Domain Registration Prices
Q1.1 Can VeriSign raise its prices under the current .COM agreement? Under the proposed new .COM agreement?
A1.1 Under the current .COM agreement, VeriSign may increase prices with thirty days notice and with ICANN approval (which may not be unreasonably withheld). VeriSign has not raised its prices since the contract has been in effect, and has indicated that is has no current plans to increase prices.
Under the proposed new .COM agreement, VeriSign may raise its service fee (currently US$6.00) for domain registrations by up to 7% per year starting in 2007. VeriSign will be required to give six-months notice before any price increase, and to continue to offer registrants the option to lock-in price for up to ten years of registration service at current prices.
Q1.2 Why is it appropriate for VeriSign to be allowed to raise its prices by up to 7% per year?
A1.2 In order to provide for a transition to allowing market forces to determine prices, ICANN and VeriSign agreed to relax the current price cap, which has remained unchanged since ICANN came into existence, on a graduated basis. The proposed agreement clarifies ICANN's role and recognizes that determination of whether a registry's action raises competition issues is an appropriate function of existing governmental competition authorities. ICANN consulted with the U.S. Department of Commerce and its views were taken into account by ICANN and VeriSign in agreeing to the pricing provisions in the proposed new .COM agreement.
Q1.3 What assurances are there that all .COM registrants will be provided notice of any price increase, and the steps they can take to lock-in current prices?
A1.3 If VeriSign, or any other operator, decides to change its price it will be in registrars' interest to let their customers know about the opportunity to lock-in lower prices before any price increase becomes effective. The proposed agreement requires the registry operator to provide six-month's notice before any registry price increases take effect.
Q1.4 How is the average .COM domain name holder expected to be affected by the allowed price increases?
A1.4 Prices have dropped from US$50 per year for a .COM domain name to as low as under US$10 since ICANN introduced registry and registrar competition in 1999. In terms of the typical .COM domain name holder (an individual who holds one domain name), they will benefit from VeriSign's investment in the .COM registry, they can lock in their current domain name price for 10 years, resulting in registration through 2015. For the millions of .COM registrants who hold one domain name, they currently pay between US$7- US$35, depending upon the registrar that they use, and they would have a year to lock-in this price through 2015.
2. ICANN Fees
Q2.1 Why does the agreement increase the amount of money ICANN will receive?
A2.1 The Internet is growing strongly and globally. To ensure that the world realizes the benefits of a single, secure, stable interoperable Internet requires ICANN to globally coordinate its administrative functions and communicate and involve stakeholders throughout the world. In order to continue its responsibilities, ICANN must establish an adequate, stable source of funding. ICANN does not receive government funding. Rather, ICANN's operations are entirely supported by its private sector participants.
Q2.2 How would ICANN spend the additional funds it would receive under the proposed agreement?
A2.2 Each year, ICANN undertakes a public budgeting process that culminates in adoption of an annual budget by the ICANN Board. The budget for fiscal year 2005-06 has been adopted by the Board. ICANN is not authorized to make expenditures greater than those described in the budget without a similar, public process.
If there are revenues that exceed the plan and if increased spending levels are approved through a transparent process, ICANN has identified potential projects in its current operational plan (as well as the need to establish a reserve fund) that are not currently funded. These projects are labeled "in development" in the currently posted operational plan.
3. Settlement Approval
Q3.1 Has the U.S. Government approved the proposed settlement agreement?
A3.1 No. Although ICANN consulted with the U.S. Government during the development of the proposed agreement, ICANN is expected to consider public comment before asking ICANN's Board to approve it. It will then be submitted to the U.S. Department of Commerce for approval.
4. Presumptive Renewal
Q4.1 When will the current .COM agreement expire, and would there be a competitive bidding process when it expires?
A4.1 The .COM agreement executed in 2001, which concludes at the end of 2007, did not include provisions for a re-bid; rather, it had a presumption of renewal that could only have been overturned in the case of a "substantial material breach." Historically, this has been a feature of the .COM agreement; the original .COM agreement of 1999 contained very similar presumptive renewal language.
Q4.2 Why does the proposed agreement extend VeriSign's .COM contract to 2012 and give it presumptive renewal?
A4.2 Extending VeriSign's .COM registry contract to 2012, as proposed in this agreement, maintains Internet security and stability. Uncertainty in the registry contracts discourages investment and can be potentially destabilizing. Contract extensions and presumptive renewal clauses provide operators with the business certainty needed to make large-scale investments in registry infrastructure. This incentive for long-term investment is coupled with safeguards that allow for change if the contract is breached.
Furthermore, the benefits of eliminating existing and future disputes with VeriSign, coupled with the security and stability benefits, is of significant value to the community that is only achievable through negotiations with VeriSign. Absent unexpected circumstances, the VeriSign agreement for .COM will be renewed in 2012, pursuant to the terms of the new agreement. The current .COM registry agreement was for a six-year term. The proposed .COM registry agreement is for five additional years beyond 2007.
Q4.3 Under the previous .COM agreement, VeriSign agreed to expend US$200,000,000 on certain research, development, and infrastructure improvements. How did they invest it and why does the new agreement contain no similar investment requirement?
A4.3 VeriSign has demonstrated the commitment to make substantial investment in its infrastructure to ensure continued stability and security. It is clear that the need for significant added investment will be required every year in the future and not just through 2007, as usage increases and the complexity and sophistication of security threat grows more prominent. By tying VeriSign's future as a registry operator to an agreement that quantifiably through service metrics measures its ability to withstand mounting threats and substantially increased volumes, the Registry operator is not only incented to, but required to, invest to keep the infrastructure secure and stable. VeriSign has invested in research and development and capital to design and deploy numerous improvements, including for example ATLAS, new SRS capabilities and capacity, new regional resolution servers, and new monitoring tools. VeriSign has maintained 100% availability of resolution services in the context of daily queries increasing from 1 billion to 17 billion.
5. Dispute Resolution
Q5.1 Does the proposed agreement provide for sanctions in the event of a breach?
A5.1 The 2001 registry agreement included an administrative "sanctions program" that has proved to be impractical and has never been utilized. In all of its recent registry agreements, ICANN has moved away from administrative sanctions programs in favor of arbitration-based enforcement provisions. Unlike the administrative sanctions programs, which are difficult to enforce in practice, the arbitration-based enforcement provisions permit alternative dispute resolution mechanisms and should be more efficient and effective. The proposed .COM agreement and all of the other registry agreements ICANN has entered in 2005 (.JOBS, .TRAVEL, .NET) provide for damages awards by arbitrators, including punitive damages in some cases. Provisions also exist for the use of injunctive relief through courts for the purpose of aiding the arbitration or preserving rights during the pendency of the arbitration.