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VeriSign Submission to ICANN Board

29 March 2001
Posted: 30 March 2001

[29 March 2001]

Vinton Cerf
Chair
Board of Directors
Internet Corporation for Assigned Names and Numbers

Dear Vint:

I appreciate the opportunity to set the record straight concerning a number of allegations made about VeriSign during the Melbourne meeting. They concern our market share, our acquisition of NameSecure, the relationship between the VeriSign Registry and NSI Registrar, the registrar market and several alleged "predatory practices." I hope that you and the other Board Members will find the following information helpful:

VeriSign's Market Share: The NSI Registrar's percentage of total registrations in the top-level domains ("TLDs") of .com, .org, and .net has been steadily declining, from 100% in mid-1999 to 52% at the end of 2000. Even more important, during this period the NSI Registrar's percentage of new registrations—a critical benchmark for measuring growth—declined to 35%. If the number of registrations from the other 243 TLDs (including the ccTLDs that, according to ICANN management, collectively account for about one-third of all global domain name registrations) and from the addition of at least seven new gTLD registries (some of which are also registrars) is included, then the NSI Registrar's market share of total and of new registrations would be substantially less than 52% and 35%, respectively. In addition, were the NSI Registrar to be sold under "Plan A" to another registrar, the purchaser's market share would immediately increase by at least 35%, thereby undermining increased competition.

Acquisition of NameSecure: In November 2000, the NSI Registrar was approached by NameSecure's founder out of concern that NameSecure's daily operations were jeopardized by lack of funding. The NSI Registrar agreed to purchase the company, which increased its market share by less than 1%. The NSI Registrar did not seek out NameSecure, and no one has suggested that the acquisition of a small registrar violates the NSI Registrar's agreements with ICANN and the U.S. Department of Commerce.

VeriSign-NSI Merger: The company that emerged from VeriSign's acquisition of Network Solutions in June 2000 is a fundamentally different one. VeriSign continues to maintain the strict separation between the .com, .org and .net registry (VeriSign Global Registry Services) and the NSI Registrar, and has continued the safeguards that NSI agreed to (e.g., the revenues and assets of the VeriSign Registry are not used to financially advantage the NSI Registrar to the detriment of competing registrars). Indeed, no credible allegations have ever been made against the VeriSign Registry, VeriSign, or NSI before it, for acting otherwise.

BulkRegister.com: Some have suggested a connection between the VeriSign Registry or the NSI Registrar and the financial reorganization of BulkRegister.com. Neither the VeriSign Registry nor the NSI Registrar has direct knowledge of the situation BulkRegister.com encountered, but VeriSign has often stated publicly that success as a registrar depends upon a substantial capital commitment, an efficient registration system, and a pricing structure that allows for an appropriate return. This is true irrespective of which option the Board selects.

Registrar Consolidation: The remarks attributed to VeriSign's CEO concerning the potential consolidation of the over 80 active registrars into a smaller number has been taken out of context. Historical trends in other emerging markets suggest that there may come a time when the competitive saturation point is reached, i.e., a large number of registrars, but not all, will constitute the market and others will merge or fold.

Predatory Pricing: This allegation is apparently a reference to a promotion in which the NSI Registrar offered a three-year registration with the first year "free", which is said to have caused the transfer of 6,000 registrations from an unidentified registrar to the NSI registrar. Beginning as far back as Amendment 11 to the Cooperative Agreement, the NSI Registrar was required to permit any customer with whom it had a contract to terminate that relationship and to transfer to other registrars. All
registrants are free to change registrars at any time, and transfers now occur in both directions, sometimes based on discount incentives. Offering a multi-year registration with one year "free" is effectively a discount and standard practice across the registrar business. As long as the seller's costs are recovered, there does not seem to be anything anticompetitive, unusual or deceptive about it.

Customer Lead Lists: Statements were also made alleging that the NSI Registrar, by offering a subset of its commercial customer list to providers of other resources (e.g., web-hosting and ISP services), engaged in a "predatory practice." The agreements between ICANN and the NSI Registrar, however, do not preclude the Registrar from co-marketing other services with partners. The consensual use of business customers' data - distinct from the WHOIS database - is a business practice routinely used by competing registrars.

Registry Software Modifications: Although this allegation was somewhat unclear, we believe it refers to the VeriSign Registry's system for auto-renewals. When a domain name reaches its anniversary date, the Registry's system automatically renews it and adds one year to its contract period. Registrars then have 45 days to delete the registration or let it continue. If a registrar deletes the domain name within the 45-day period, it does not pay for the renewal. If it does not delete the name, the fee is
charged against its credit line. In early February, however, the VeriSign Registry discovered that its billing system was improperly crediting registrars' accounts for deletions made only during days 1-5 of the 45-day period, and not for deletions that occurred during days 6-45. The system was corrected upon discovery of the problem and credit balances are being adjusted.

Delayed SRS Access: "Interdomain" claimed that its 80-minute delay in accessing the VeriSign Registry's Shared Registration System ("SRS") in connection with the multilingual testbed was "predatory conduct." Access was delayed because Interdomain did not pass the certification test until February 23, 2001 and would have been added to the Access Code List (ACL) during the next regularly scheduled update on February 27, 2001. The test-bed, however, was upgraded to add new code points on February 26, 2001. Once the problem was discovered, the VeriSign Registry manually added Interdomain to the ACL that morning.

Expired Domain Names: The NSI Registrar is not offering "expired" domain names for "resale" through GreatDomains at a premium. No "expired" domain names have been listed on the NSI Registrar's listing website, GreatDomains.com. The NSI Registrar has never auctioned any domain name registration whose contractual period has ended. Indeed, in 2000 the NSI Registrar deleted approximately 3,400,000 unpaid initial and renewal domain name registrations.

European Commission: References were made to an "EC Investigation against the NSI Registrar." On March 19, 2001, VeriSign responded to a complaint filed by a European domain names speculator alleging discriminatory access to the VeriSign Registry. The speculator filed the complaint with the EC, which referred it to VeriSign for response. Our examination of the complaint revealed that the speculator's practice is to register domain names without payment, closely monitor the billing and deletion cycle for those domain names, and then immediately re-register those domain names upon deletion, without ever paying a registration fee to any registrar. Since 1998, the complainant has utilized this scheme to register and re-register over 4,000 domain names, incurring over $300,000 in unpaid registration fees with the NSI Registrar alone. The allegations in the complaint are false and, we believe, a misuse the EC complaint process.

Thank you for the opportunity to address these issues. Please don't hesitate to let me know if we can be of further assistance.

Sincerely,

Roger J. Cochetti
Senior Vice-President, Policy
VeriSign

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