[ga] Combined Response - Tiered (Variable) Pricing

["Michael D. Palage" <Michael@xxxxxxxxxx>]

Hello All:

In the interest of efficiency a combined response to the many comments
that I have received. However, before beginning just a couple of
background points. First, my comments are in my own individual capacity.
I have repeated this many times in the past, particularly when I served
on the Board, but it is always good to remind people of this fact.
Second, given the volume of posts it is sort of me against everyone.
That is fine but I would encourage everyone to continue to keep a
positive tone. When people encourage the Board during their next retreat
to fire staff, trust me that works against your creditability when the
Board makes its decision. It is my personal opinion that most of the
ICANN staff are very qualified professionals that give 100% and act
within what they believe is the organization's best interest. 

Response to George:

With regard to NeuStar and Afilias, their current contracts called for
them to engage in negotiations with ICANN "no later than eighteen months
prior to the initial Expiration Date." That 18 month window started at
the end of January 2006. So I fail to see why they are jumping the gun
on their negotiations. Some commentators have properly noted that PIR's
contract does not terminate until 2009 with a similar eighteen month
negotiation window. Notwithstanding these timelines, there is nothing
prohibiting two parties in a bi-lateral contract from entering into
negotiations earlier. In this case it appears that both ICANN and PIR
wish to standardize their contracts to be in line with the other major
gTLD registries. 

Response to Ted @ Prophet Partners:

Ted nice to meet you and thanks for your contributions. Like many
commentators I respect your opposition to the restriction of price caps
from the registry contracts. However, as I have tried to articulate
previously, I believe potential abuses by a sole source registry
operator are best left to national competition authorities. Obviously
this is a point which many in the community disagree. There is one
important potential misunderstanding that I wanted to address. In your
response you talked about how the registry could impose tiered(variable)
pricing on a registrant at renewal. That would not be the case in my
proposal. As long as the registrant renewed the domain name prior to the
end of the redemption grace period, the tiered(variable) pricing would
not apply because that would constitute a registered name. Just to make
sure there is no confusion, as the registrant of prophetpartners.com as
long as you maintained your registration, the only fee increased you
would be subject to would be universal (across the board) fee increases
such as a 7% annual fee increase. The registry would not be able to
impose any per domain name tiered(variable) pricing on your domain name.

Response to Tim Ruiz:

Just to be clear. I stated that "ICANN accredited registrars will be an
important part of the domain name market now and into the future and
they should be. However, I find it highly unlikely that ICANN will
mandate the exclusive use of ICANN accredited registrars in EVERY TLD."
I am not proposing the elimination of registrars from the current
marketplace. As Chuck Gomes noted, VeriSign is very happy with the ICANN
registrars providing domain name registration services in the .COM and
.NET TLDs. However, as the Dec05 PDP Committee properly noted there may
be circumstances where existing ICANN accredited registrars are not
properly serving the community of a sTLD. In this situation the
discussion was for the registry to become a registrar. Unfortunately
this is sort of putting form over substance to require the small
registry operator to expended limited resources becoming a registrar.
The point I am trying to make is that there are potential circumstances
where a registry would not need the use of ICANN accredited registrars.
To impose the exclusive use of ICANN accredited registrars before
understanding the potential business models that new registry operators
may propose is overly restrictive.

My personal view is that the default position for new registry operators
would be to exclusively use ICANN accredited registrars. However, I
would have a procedure whereby a registry operator could demonstrate
that the exclusive use of ICANN accredited registrars was an
unreasonable imposition. 

With regard to the need for competition and choice among registry
operators. I agree it is not weeks or months away. I do not think it is
unfair to say that ICANN has put all its eggs into one basket given its
recent actions. That is why I am focusing so much energy on the new TLD
process, because if that fails, things are not looking very optimistic
on the competition front in the long term.


Response to Andy:

When discussing these contracts everyone, including myself, sometimes
defaults to talking about VeriSign. However, what we are talking about
are NeuStar, Afilias and PIR. All of these companies registry revenue
combined together pales in comparison to the revenue that VeriSign
collects. However, since you mentioned VeriSign lets look at how they
have protected the reasonable expectation interests of registrants. The
price of a .com name has not increased in seven years and they have
perfect or almost perfect resolution. Granted the SiteFinder experiment
was a surprise and not what registrants and the larger Internet
community was expecting, but they did halt SiteFinder after formal
notice from ICANN.


Response to Danny:

Carolyn Hoover, is the designated representative for .COOP within the
registry constituency. There are times when Carolyn may not be able to
make an in person meeting where I will sit in and act upon a given set
of instructions. As noted above, the comments I make are in an
individual capacity unless otherwise noted. It is true that registrants
pay a substantial portion of ICANN's budget either indirectly through
registrars or registries. Although I share your concerns about ICANN's
growing budget and its impact on all parties, the fact is a price of a
domain name is still a fraction of what it cost prior to ICANN's
creation. I look forward to the operational and strategic planning
cycles which ICANN will be undertaking on a regular basis. I hope that
some of the metrics that will be used will help increase the level of
accountability in connection with ICANN's operations.

Response to Chris:

Although I agree that a faulty business plan can be a indicator for a
potentially failed business, the best business plan is no guarantee for
success. I think ICANN and their experts to date have done a fairly
reasonably good job in evaluating the various business plans of the TLD
applicants. Of course executing upon what is written is a different
story, which ties back into compliance and enforcement issues.


Response to Karl:

The lock-in factor is a very real consideration, and an issue that I
have thought about in great detail. Although there is no absolute
safeguard to a registry raising pricing to the detriment of a
registrant, one of the only safeguards is the ability to cap off a
registration for up to 10 years allowing a registrant a long runway to
transition to another TLD. I understand that this is less than an
optimal safeguard, and perhaps increasing the maximum duration of a
registration beyond 10 years may be an option other registries may which
to consider in the next round as there does not seem to be a reason to
fix this at an arbitrary 10 year period.


Response to Chuck:

Thanks for making clear the registry constituency statement and the
basis for it.


Response to Thomas:

With regard to tiered/variable pricing in connection with the launch of
a new TLD, I offered the example of .MOBI's recent launch where they
used various price points in connection with Sunrise (for trademark
owners), land rush (first couple of weeks of general registration) and
steady state (normal registrations). Rolling out a new TLD in an
equitable fashion is becoming increasing difficult due to the
sophistication of professional registrants. As one person whom I have
the highest respect for stated to me recently, tell us the registry
roll-out rules and I will tell you how we are going to f**k you.
Professional domain name registrants now have larger trademark
portfolios that some international companies I know, with the sole
purpose of providing preferential registration rights during registry
launches.

Now John Berryhill and I believe Sortis have questioned why should the
registry recognize this windfall instead of professional registrants. My
simple answer is that ICANN has privity of contract with the registry
and thus has the potential ability to correct any inequitable action.
There are no such safeguards in connection with the secondary market
players.

Launching a new registry is about building brand recognition and
consumer confidence. Part of that objective is being able to have the
domain name being visibly used in the public eye. To consider why a
registry should be permitted some discretion in the allocation of domain
names on a tiered(variable) basis consider the following hypothetical.
Overstock, Oakley and Oprah all bid for O.COM. Oprah is selected by
VeriSign to be the registrant of O.Com either through an auction or some
other equitable process. All three applicants then approach NeuStar
about O.BIZ. The reality is Oprah is just trying to defend her single
letter O turf, whereas Oakley or Overstock might actually use O.BIZ in
commerce and build the .BIZ brand among consumers. In this circumstance,
NeuStar should have some discretion in the allocation of O.BIZ in a
process other than a first-come first serve model and be permitted to
base any registration fees on a tiered(variable) model.

Although I generally avoid using property analogies in connection with
domain names, launching a TLD is a lot like building a city where the
government needs some discretion with regard to zoning and planning. If
a registry launch is compromised by professional registrants that take
all the Class "A" office space and put for sale signs in the windows,
that negatively impacts the mayors ability to attract new inhabitants
into the city and build sustainable and diverse revenue base.

I think I have answered most of the questions. My apologizes to any one
that I forgot. Considering I have exceeded my ICANN non-billable time
allotment for the week, I will probably not be responding until early
next week. So thanks again for the constructive dialog. 

Best regards,

Michael D. Palage