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Paul Twomey's Presentation on the Proposed Verisign Settlement

Posted 10 December 2005

On 02 December 2005, Paul Twomey, CEO of ICANN, gave a presentation concerning the Proposed Settlement with VeriSign to the ICANN Public Forum Meeting. A copy of the slides for that presentation may be found at <http://www.icann.org/meetings/vancouver/twomey-settlement-presentation-02dec05.pdf>.

The real-time transcript of that presentation is presented below. Note that though the captioning output is largely accurate, in some cases it could be incomplete or inaccurate due to inaudible passages or transcription errors. It is posted as an aid to understanding the proceedings at the session, but should not be treated as an authoritative record.

>>PAUL TWOMEY: THANK YOU. I KNOW THIS IS GOING TO BE A TOPIC OF A LOT OF
INTEREST AND A TOPIC FOR FURTHER DISCUSSION AND FEEDBACK.

I'D LIKE TO STOP BEFORE I GO THROUGH SLIDES AND BASICALLY TELL THE STORY, A
PERSONAL STORY FROM MY PERSPECTIVE OF THE JOURNEY WHICH TAKES US TO TODAY.

MANY OF YOU IN THIS ROOM HAVE BEEN INVOLVED WITH ICANN AND BEFORE ICANN WITH
THIS SPACE, AND PARTICULARLY WITH ICANN SINCE THE FORMATION. AND YOU WILL
KNOW THAT IF THERE'S BEEN TWO POINTS OF THINGS THAT PRODUCE HEAT IN A LOT OF
OUR DISCUSSIONS OVER THE LAST SEVEN YEARS NOW, IT IS, ONE, ANY DISCUSSION
ABOUT THE .COM CONTRACT, BECAUSE THAT IS ALWAYS A NOISY AFFAIR, AND THE
SECOND IS ABOUT INTRODUCTION OF SERVICES AND PARTICULARLY SERVICES INTRODUCED
INTO .COM OR .NET OR .ORG AT SOME STAGE PROPOSED BY VERISIGN. SOME OF YOU
WILL REMEMBER IN MELBOURNE NOT ONLY WAS THERE DISCUSSION ABOUT THE .COM
CONTRACT; THERE WAS ALSO A DISCUSSION ABOUT IDN SERVICE.

SO WE HAVE MANAGED AGAIN TO PUT ALL OF THOSE INTO ONE PROCESS. BUT I JUST
WANT TO SAY THAT THIS HAS ALWAYS BEEN A TOPIC WHICH PRODUCES HEAT AND LIGHT
IN THIS COMMUNITY.

YOU WILL RECALL THAT IN 2003 THE OPERATOR OF THE .COM AND THE .NET REGISTRY
INTRODUCED SITE FINDER AS A NEW SERVICE. I WAS ACTUALLY RUNG ON A MONDAY
AFTERNOON AND TOLD IT WAS GOING TO BE INTRODUCED THE NEXT DAY FROM A
REPRESENTATIVE OF VERISIGN AND THE PREVIOUS -- MY TECHNICAL PEOPLE RANG ME
FIVE MINUTES LATER AND SAID IT WAS INTRODUCED THREE HOURS AGO. SO THERE WAS
VERY LITTLE NOTICE, AND YOU WILL REMEMBER THE DEGREE OF HEAT THAT PRODUCED IN
THE INTERNET COMMUNITY AND IN THE ICANN COMMUNITY.

YOU MAY RECALL THAT I REPORTED AT THE TIME THAT WE HAD -- I HAD MYSELF, AND
MEMBERS OF MY STAFF, HAD COMMUNICATIONS WITH VERISIGN IMMEDIATELY SUGGESTING
THAT THEY MAY VOLUNTARILY WISH TO REVIEW WHAT THEY HAD DONE AND MAY
VOLUNTARILY WISH TO TAKE THAT PARTICULAR SERVICE DOWN.

THAT DIDN'T HAPPEN, SO THEN ON OCTOBER THE 3RD, I THINK IT WAS, 2003 --
OCTOBER 6TH, OCTOBER 3RD, I HAVE FORGOTTEN WHICH ONE, I WROTE A LETTER TO
VERISIGN SAYING THAT IF THEY DID NOT WITHDRAW THIS SERVICE THAT WE WOULD
CONSIDER OUR LEGAL POSITION.

THAT LETTER I THINK WAS SENT ON A FRIDAY, AND ON A MONDAY, VERISIGN WITHDREW
THE SERVICE.

SOME MONTHS LATER, VERISIGN THEN SUED ICANN. AND THE LAWSUIT THAT WAS
INSTITUTED, IF YOU READ THE PUBLIC PRESS AND THEIR MESSAGING, WAS JUST TO
CLARIFY UNCERTAINTIES ABOUT THE NATURE OF THE -- HOW THEY INTRODUCE SERVICE.
WANTING CERTAINTY ABOUT HOW THEY COULD INTRODUCE NEW REGISTRY SERVICES. I
THINK A MORE OBJECTIVE ANALYSIS OF THE LEGAL DOCUMENTS, WHICH WERE THE FIRST
SET OF LITIGATION DOCUMENTS, WERE ACTUALLY ABOUT THE INEVITABLE, SINCE 1999,
THE INEVITABLE SERIOUS ANTITRUST ACTION TO BASICALLY SEVERELY LIMIT IF NOT
DESTROY THE ICANN PLACE IN THE ARENA.

I SAY INEVITABLE BECAUSE IT'S NOT -- IT IS THE NOT UNCOMMON THING THAT OCCURS
AT SOME STAGE IN THE LIBERALIZING MARKET THAT THERE IS THE SERIOUS LAWSUIT BY
THE INCUMBENT AGAINST THE FORCES THAT ARE FORCING LIBERALIZATION. AND IF YOU
THINK ABOUT TELECOMS, HOW MANY TIMES AT SOME STAGE IN THE LIBERALIZING
TELECOMS ENVIRONMENT DOES THE INCUMBENT NOT PRODUCE SOME MASSIVE LAWSUIT
AGAINST THE REGULATOR. I CAN THINK OF SEVERAL MARKETS WHERE THAT HAS
HAPPENED.

SO THIS ACTION WAS SOMEWHAT FORESEEABLE, I SUSPECT, AND PUTTING IT OFF ON
ISSUES, PROBABLY INEVITABLE.

SO WE WENT INTO INTENSE LITIGATION, SERIOUS LITIGATION. WE SPENT A LOT OF
MONEY AS WE TOLD YOU AT THE TIME.

THERE WAS A DECISION BY THE U.S. FEDERAL COURT WHICH BASICALLY THREW OUT,
DECLINED THE ANTITRUST ACTION. I THINK THAT WE HAD TWO BITES OF THE CHERRY.
I THINK IT WENT THROUGH TWO SETS OF HEARINGS, TWO DECISIONS.

I WON'T PRETEND TO GIVE YOU THE ACCURATE LEGAL STUFF. WE'LL LEAVE THAT TO
THE LAWYERS TO GIVE YOU THE ACTUAL LEGAL.

BUT ALL THROUGH THAT PROCESS, AS HAPPENS IN LITIGATION, THERE IS OCCASIONALLY
THERE IS THE SUBTLE LINE OF WHAT DOES IT TAKE TO SETTLE THIS DISAGREEMENT.
BECAUSE THIS IS ALL ABOUT COMING TO SOME UNDERSTANDING ABOUT HOW TO DO
BUSINESS.

THE AFTER THAT SETTLEMENT I MADE A PRESS COMMENT THAT WE OUGHT TO BE SPENDING
THE COMMUNITIES' MONEY DOING OTHER WORK, AND I ALWAYS PREFER TO SETTLE
PROBLEMS BY TALKING, NOT BY FUELING LAWYERS, WITH DUE RESPECT TO ALL GOOD
LAWYERS IN THE ROOM. AND AT THAT STAGE RUSTY LEWIS GOT IN CONTACT WITH ME,
THIS IS TOWARDS THE END OF 2004, NOVEMBER 2004 AND SAID WHAT DO WE NEED TO
TRY TO SETTLE THIS. WHAT DO WE NEED TO TALK?

WE WENT THROUGH A SERIES OF DISCUSSIONS THAT WENT FUNDAMENTAL FACTS FACING
THE TWO PARTIES, AND AGAIN TALKING VERY PERSONALLY HERE, AND I HOPE YOU WILL
EXCUSE THE PERSONAL STORY, MY PERSONAL APPROACH TO THESE THINGS, AS MUCH AS
POSSIBLE, IS TO TRY NOT TO GET CAUGHT UP IN POSITIONS BUT TO TALK TO PEOPLE
ABOUT WHAT THE INTERESTS ARE.

AND FUNDAMENTALLY, AS WE HAD THIS DISCUSSION, AS YOU CAN IMAGINE, THERE WAS
NO TRUST BETWEEN THESE TWO PARTIES. THIS WAS NOT A -- THIS WAS NOT A MEETING
BETWEEN FRIENDS. WE WERE IN A LONGSTANDING WAR.

SO WE TRIED TO HAVE A DISCUSSION AROUND WHAT WERE THE INTERESTS. AND WHAT
THEY CAME DOWN TO WAS BASICALLY TWO FUNDAMENTAL THINGS, REALLY. AND THESE
DISCUSSIONS TOOK PLACE NOVEMBER, DECEMBER, JANUARY, FEBRUARY. THERE WAS SORT
OF ONGOING ATTEMPTS TO TRY TO TALK THIS THROUGH.

IN THE MEANTIME, WE WERE STILL HEAVILY IN THE COURTS, THE STATE COURT IN
CALIFORNIA OVER THE ACTUAL CONTRACT ITSELF, THE ARBITRATION PROVISIONS WERE
BEING EXERCISED.

THE CONVERSATION WAS REALLY ABOUT, IF I CAN SUMMARIZE IT THIS WAY, THAT
VERISIGN AS A REGISTRY HAD AN INTEREST IN KNOWING, HAVING CERTAINTY ABOUT HOW
COULD IT INTRODUCE NEW SERVICES AND HOW COULD IT DO SO IN A TIMELY MANNER.

WHAT WE HAD AN INTEREST IN WAS BEING A STEWARD FOR THE SECURITY AND STABILITY
OF THE INTERNET AND HOW TO ENSURE THAT THAT SECURITY AND STABILITY WAS BEING,
AND THAT GENERAL SORT OF SHARED STEWARDSHIP, IF YOU LIKE, WAS BEING
RECOGNIZED.

AND WE GRADUALLY TALKED THAT THROUGH.

WE WERE MUCH AIDED AND HELPED IN THAT DISCUSSION BY A SEPARATE PROCESS THAT I
HAD INITIATED IN OCTOBER 2003, WHICH WAS A LETTER TO THE CHAIR OF THE GNSO
ASKING FOR A POLICY DEVELOPMENT PROCESS AROUND NEW REGISTRY SERVICES.

AND WHAT CAME OUT -- FUNDAMENTALLY WHAT CAME OUT OF THESE DISCUSSIONS WAS IF
WE WERE GOING TO HAVE A WAY OF GOING FORWARD WITH NEW REGISTRY SERVICES,
WHICH DOES NOT END UP WITH REPEATS OF WLS AND SITE FINDER AND MANY OF THE
THINGS THAT HAVE CAUSED DIFFICULTIES, WE NEED TO BASICALLY DO TWO THINGS. WE
NEED TO DETERMINE WHETHER SOMETHING IS A COMPETITION ISSUE OR NOT AND WE NEED
TO DETERMINE IF THIS IS GOING TO BE A SECURITY OR STABILITY ISSUE OR NOT.

AND WE NEED TO HAVE SOME INDEPENDENT, FINITE WAY OF BEING ABLE TO DO THAT.

WHEN IT CAME TO THE COMPETITION ISSUE, WE HAD A LOT OF DISCUSSION ABOUT THAT,
AND, YOU KNOW, WORKED ON THE SENSE THAT COMPETITION LAW IS SOMETHING THAT IS
DONE BY THE SOVEREIGN. IT IS ESTABLISHED AND OPERATES WITH EVERYBODY IN MOST
COUNTRIES OF THE WORLD. THESE PEOPLE ACTUALLY DETERMINE WHAT IS COMPETITION
RULES. THAT'S THE APPROPRIATE PLACE THESE QUESTIONS OUGHT TO GET ASKED.

AND SECONDLY, WHEN IT COMES TO SECURITY AND STABILITY, IT REALLY IS THE ICANN
COMMUNITY WHERE YOU LOOK TO GET THE -- AND THE INTERNET COMMUNITY WHERE YOU
LOOK TO GET THAT EXPERTISE, SO IS THERE A WAY OF ESTABLISHING A SPECIALIST
EXPERT GROUP THAT COULD ACTUALLY ANALYZE IN AN OPEN WAY, BUT IN A TIMELY WAY,
THE PROCESS OF A NEW SERVICE IF IT HAD A SECURITY AND STABILITY IMPACT.

AND AGAIN, IN THE PROPOSED LANGUAGE YOU WILL SEE IN THE PROPOSED CONTRACT
IT'S VERY SIMILAR TO THE PDP LANGUAGE THAT EMERGED THROUGH THE GNSO.

IN THE DISCUSSIONS THAT TOOK PLACE, REMEMBER THESE DISCUSSIONS THAT ARE
AROUND -- AROUND SETTLEMENT, IT BECAME CLEARER AS WE TALKED THROUGH THE
FUNDAMENTAL ISSUES THAT THEY WOULD REQUIRE AN AMENDMENT TO THE CONTRACT IF
THEY WERE GOING TO BE BROUGHT INTO EFFECT.

SO THESE WERE DISCUSSIONS THAT WERE TRYING TO DEAL WITH THE FUNDAMENTAL
CAUSES BEHIND THE LAWSUIT. NOT JUST THE LAWSUIT BUT THE FUNDAMENTAL CAUSES
OF WHY THERE HAD BEEN SO MUCH ANGST FOR THE PREVIOUS YEARS.

AND SO THAT'S WHY WE CONSIDERED THE AGREEMENT, AND BROUGHT THE AGREEMENT INTO
THE DISCUSSION AND CONSIDERED THROUGH THE SORT OF TERMINOLOGY WHAT SHOULD BE
IN THE AGREEMENT. THAT'S WHY IT'S A PIECE OF THE WHOLE, IF YOU LIKE, THE
THINGS WERE LINKED TOGETHER.

SO WE WORKED THROUGH THAT. THERE WAS LANGUAGE BORROWED HEAVILY IN THAT
AGREEMENT FROM THE LANGUAGE THAT HAD BEEN PREPARED FOR THE SPONSORED
TOP-LEVEL DOMAINS THAT HAD ALSO GONE OUT IN A -- WHAT'S THE WORD I'M LOOKING
FOR? -- A PUBLIC COMMENT PERIOD ALSO FOR .NET.

SO THAT FRAMEWORK OF A CONTRACT WAS THERE. WE REFERRED A LOT TO THAT IN
TERMS OF THE STUFF THAT WAS BEING PUT IN FOR THIS WHOLE ARRANGEMENT OF THE
.COM.

AND THERE'S MORE TO THE AGREEMENT. SO I'M NOT GOING TO TRY TO GO THROUGH ALL
THE ASPECTS OF THE AGREEMENT, BUT I'M TRYING TO GIVE THE SENSE OF THE
FUNDAMENTAL ISSUES WE WERE TRYING TO DEAL WITH AND WHY THE AGREEMENT GOT
INCORPORATED INTO THE FUNDAMENTAL ISSUES OF TRYING TO SETTLE THE CAUSES OF
CONFLICT. AND I CERTAINLY THINK WE FELT ON THE ICANN SIDE THAT WE WERE
TRYING TO ADDRESS SOMETHING FOR THE ENTIRE COMMUNITY, FOR THE WHOLE ENTIRE
INTERNET, WHICH WAS TRY TO SOLVE A FUNDAMENTAL PROBLEM BOTH FOR THE ONGOING
HEALTH OF THE DOMAIN NAME SPACE BUT ALSO A FUNDAMENTAL SORT OF SET OF CAUSES
FOR CONSTANT CONFLICT INSIDE THE ICANN FORUM.

WE HAD, AS PART OF THE DISCUSSION -- I SHOULD TAKE YOU BACK.

IN 1999, WHEN THERE WAS THE FIRST MOVE TO BREAK UP THE -- TO MOVE THE
SO-CALLED MONOPOLY, BECAUSE I DON'T WANT TO DEFINE WHAT MONOPOLIES ARE, BUT
TO MOVE THE MONOPOLIES ARE FROM ONE OPERATOR. THERE WAS A SET OF AGREEMENTS
PUT IN PLACE, WHICH THEN REVERT -- WHICH THE DEPARTMENT OF COMMERCE WAS
HEAVILY INVOLVED IN IN THE FORMATION. I THINK JUST FUNDAMENTALLY BECAUSE ITS
WEIGHT WAS NEEDED AT THAT TIME TO GET THE -- THAT OPERATOR TO AGREE WITH THE
AGREEMENT AND BECAUSE ICANN WAS A BRAND-NEW ORGANIZATION.

IN 2001 THEY WERE REVIEWED, AND IN THAT REVIEW, THERE WAS A FURTHER
NEGOTIATION. PEOPLE WILL KNOW ABOUT THIS FROM MELBOURNE. THERE WAS
BASICALLY THE AGREED PROCESS WAS THAT .ORG WOULD BE REBID WITH THE
PRESUMPTION OF GOING OUTSIDE, OF GOING TO ANOTHER OPERATE. THAT .NET WOULD
BE REBID WITH THE PRESUMPTION OF AN OPEN BIDDING SITUATION.

AND THAT .COM WOULD BE A PRESUMPTIVE RENEWAL FOR .COM AND THAT WAS WRITTEN
INTO THAT CONTRACT. AND D.O.C.'S ROLE IN CONFIRMING ANY CHANGE TO THAT
CONTRACT WAS ALSO WRITTEN IN BECAUSE THERE WAS A CONTINUATION OF THE NEED TO
GET THIS SPECIAL FORCING THROUGH THE SORT OF CONTINUOUS CHANGE OF
LIBERALIZATION, IF YOU LIKE, OR BREAKING UP THE MONOPOLY.

I'M MAKING THAT POINT BECAUSE ONE OF THE UNIQUE ASPECTS OF THIS NEGOTIATION
WAS THAT IT WAS A THREE-PARTY AFFAIR. THERE HAS BEEN A THIRD PARTY INVOLVED,
IS A BETTER WAY OF PUTTING IT. THERE HAS BEEN A THIRD PARTY INVOLVED, WHICH
HAS BEEN WE HAVE BEEN REQUIRED TO CONSULT THE DEPARTMENT OF COMMERCE IN THIS
DISCUSSION.

ONE OF THE KEY AREAS THAT WE STARTED IN OUR DISCUSSIONS WITH VERISIGN AT THE
FUNDAMENTAL ISSUE WAS THERE IS A REAL ISSUE HERE ABOUT -- FOR US, ONE OF THE
THINGS IS HOW DO WE PROMOTE -- HOW DO WE FURTHER PROMOTE COMPETITION. THAT'S
WHAT WE ARE CHARTERED FOR, SO LET'S TALK ABOUT HOW COMPETITION WORKS IN THE
TLD SPACE. AND WE HAD QUITE A BROAD DISCUSSION ABOUT THE NATURE OF LOCK-IN
MARKETS, WHAT'S THE NATURE OF HOW THOSE MARKETS WORK, WHAT'S THE ROLE OF
PRICE CAPS. IS IT EFFECTIVE TO HAVE LONG-TERM PRICE CAPS, DO THEY ACTUALLY
PROMOTE LONG-TERM INTRODUCTION OF NEW TLDS TO COMPETE WITH THE TLD. A WHOLE
RANGE OF CLASSIC MICRO ECONOMIC DISCUSSIONS IN PARTICULAR TYPES OF
MARKETPLACES.

WE HAD THE DISCUSSION BETWEEN THE TWO PARTIES BUT WE KNEW WE WERE GOING TO
HAVE TO TAKE ISSUES OF PRICE, PRICE CAP, WHAT HAVE YOU, AS PART OF THE
CONVERSATION WITH THE D.O.C.

SEEING I HAVE BEEN ASKED QUESTIONS ABOUT THIS I CAN GO INTO FURTHER DETAIL.
THE D.O.C. IMMEDIATELY TOOK THIS AGREEMENT, PARTICULARLY THOSE QUESTIONS,
AND PASSED IT TO THE DEPARTMENT OF JUSTICE. AND IT WAS QUITE A LONG
DISCUSSION, PARTICULARLY BETWEEN VERISIGN AND THE DEPARTMENT OF JUSTICE,
ABOUT ISSUES CONCERNING PRICING AND IF I CAN CHARACTERIZE -- AGAIN, I DON'T
SPEAK FOR VERISIGN HERE, BUT IF I CAN CHARACTERIZE THE NATURE OF THE VERISIGN
DISCUSSION, WE SAID THIS IS A LONG-TERM BUSINESS, WE HAVE RISKS IN THE
LONG-TERM BUSINESS, WE RECEIVED THE REVENUE AROUND ONE BASIS, WHICH IS
REVENUES RECEIVED PER NAME REGISTERED. OUR COSTS ARE DRIVEN BY OTHER THINGS.
OUR COSTS ARE DRIVEN BY RESOLUTION, BY ATTACKS, BY INCREASES IN CERTAIN
ASPECTS. SO IT'S A DISAGREEMENT BETWEEN OUR COSTS -- THERE'S NOT AN
ALIGNMENT BETWEEN OUR COST AND OUR REVENUE.

NOW, THAT WAS THEIR CASE TO MAKE. I AM NOT TRYING TO JUSTIFY THAT CASE. YOU
CAN CRITICIZE IT OR OTHERWISE. I AM JUST TRYING TO CHARACTERIZE IT. BUT
THAT WAS THE NATURE OF THE DISCUSSION THAT TOOK PLACE BETWEEN QUITE A LOT OF
OFFICIALS AND ECONOMISTS IN THE DEPARTMENT OF JUSTICE AND WITH VERISIGN OVER
A LONG PERIOD OF TIME. THERE WERE OTHER DISCUSSIONS ABOUT CERTAIN INDICES,
CERTAIN INDUSTRY INDICES AND INFLATION AND ALL SORTS OF ASPECTS.

BUT EVENTUALLY AT THE END OF THAT PROCESS, THERE WAS A NUMBER -- THERE WAS A
RECOMMENDATION OR A NUMBER RECOMMENDED WHICH WAS A 7% CAP ON PRICE INCREASES.

WE TOOK THAT 7% AND PUT IT IN THE PROPOSED CONTRACT.

SO THAT'S A PIECE OF THE HISTORY, IF YOU ARE WONDERING WHERE DID THE 7%
NUMBER COME FROM, THAT'S THE HISTORY OF THAT.

I WANT TO BE VERY, VERY CLEAR, THE DEPARTMENT OF COMMERCE HAS NOT APPROVED
THIS CONTRACT. AS UNDER THE CURRENT CONTRACT IT WOULD BE REQUIRED TO DO.
THE PROPOSED CONTRACT.

NOR HAVE THE BOARDS OF THE TWO ORGANIZATIONS APPROVED -- SO THIS IS STILL
VERY STRONG, STILL A PROPOSED SETTLEMENT AND A PROPOSED CONTRACT.

WHEN WE HAD THESE DISCUSSIONS, VERISIGN EXECUTIVES, LIKE THE MOST SENIOR
EXECUTIVES IN VERISIGN, SAID ONE OF THE THINGS THEY HAD TO REMAIN VERY
CONCERNED ABOUT OR WERE VERY SINCERE IN THEIR BELIEF IN IT WAS THEIR
INTERPRETATION OF THE LEGAL ISSUES THAT FACED THEM AS EXECUTIVES OF A
PUBLICALLY LISTED COMPANY. AND PARTICULARLY ANNOUNCEMENT EFFECTS, RICH'S
ANNOUNCEMENT EFFECTS ON THE SHARE PRICE OF THE STOCK MARKET.

WE DID NOT QUESTION THEIR INTERPRETATION OF THE LEGAL POSITION. WE ACCEPTED
IT AT FACE VALUE. WE DIDN'T THINK IT WAS APPROPRIATE WE SHOULD REANALYZE
THEIR INTERPRETATION. BUT WHAT WE DID SAY WAS THAT AT SOME STAGE IN THIS
PROCESS, WHEN IT GOT TO A STAGE OF GREATER CERTAINTY, WE WERE GOING TO HAVE
TO GO TO PUBLIC CONSULTATION AND WE WERE NOT AGREEING TO THIS AGREEMENT UNTIL
THEY WENT TO PUBLIC CONSULTATION AND WE WERE CLEAR FROM THE VERY BEGINNING ON
THAT IN THE FIRST DISCUSSIONS.

SO WHEN THE ACTUAL POST SETTLEMENT AND CONTRACT WERE ANNOUNCED, AND THEY WERE
CERTAINLY ANNOUNCED PARTLY TO -- IN WAYS THAT WERE PARTLY ADDRESSED TOWARDS
VERISIGN'S OWN NEEDS WITH MARKET CONDITIONS, ET CETERA, BUT WE WERE VERY
COMMITTED THAT WE WERE IN A PUBLIC CONSULTATION PROCESS AND PUBLIC
CONSULTATION PERIOD.

SO THAT'S -- I WANT TO BE QUITE CLEAR, BECAUSE WE WERE CLEAR UP FRONT WITH
THAT.

SO THAT'S SOMETHING OF A STORY AS TO HOW WE GOT HERE.

AND I WANT TO JUST THEN GO THROUGH A BIT MORE FROM THE SLIDE. I WANT TO BE
QUITE CLEAR THAT WHEN THIS WAS POSTED IT WAS PROPOSED. IT'S NOT SETTLED.
THAT ICANN HAS COME TO VANCOUVER AND THE BOARD HAS COME NOT TO ACT ON THE
PROPOSED SETTLEMENT BUT TO BE IN LISTENING MODE THIS WEEK, TO PROVIDE
OPPORTUNITY FOR ALL CONSTITUENCIES TO PROVIDE CONCISE ACTIONABLE COMMENTS
DIRECTLY WITH THE BOARD AND STAFF.

WE WANT FEEDBACK TO THE COMMUNITY WHAT HAS BEEN HEARD. WE WANT TO TAKE THE
TIME TO SYNTHESIZE THIS INFORMATION WITH OTHER COMMUNITY INPUTS.

THEREFORE, NO DECISION IS TO BE TAKEN CONCERNING A PROPOSED SETTLEMENT AT
THIS MEETING.

SO THAT'S THE FIRST THING. WE SAID THAT DURING THE WEEK. WE'RE QUITE CLEAR.

WHAT CONSULTATION WAS TAKEN PRIOR TO THIS MEETING. WELL, THE SETTLEMENT WAS
POSTED ON 24TH OF OCTOBER, 2005, AND THERE WAS A PUBLIC FORUM. THAT PUBLIC
FORUM HAS BEEN VERY ACTIVE. LETTERS WERE SENT TO CHAIRS OF SUPPORTING
ORGANIZATIONS AND OTHER GROUPS. THERE WERE ACTIONS BY THE BOARD LIAISONS
FROM VARIOUS ADVISORY COMMITTEES COMMUNICATING THIS OUT TO MEMBERS.

WE HAD CONSULTATIONS WITH THE GTLD REGISTRARS, WE HAD SEVERAL CONFERENCE
CALLS AND LOTS AND LOTS OF INDIVIDUAL CONSULTATIONS ONE ON ONE AT THE STAFF
LEVEL.

WE HAD SIMILAR WITH THE GTLD REGISTRIES THROUGH INDIVIDUAL COMMUNICATION.
THE CCNSO CHAIR AND CERTAIN MEMBERS THAT WE COULD CONTACT AS WELL AS THE
COMMUNICATION WE GOT TO SPEAK TO SOME OF THE CCNSO MEMBERS. THE GNSO
CONSTITUENCY CHAIRS WERE SPOKEN TO INDIVIDUALLY. NRO AND ASO MEMBERS WERE
APPROACHED, WERE COMMUNICATED WITH. SOME OF THE GAC MEMBERS WERE
COMMUNICATED WITH DIRECTLY.

AND ALL CONSTITUENCIES AND COMMITTEES WERE ASKED FOR COMMENTS AND INVITED TO
MEET WITH THE BOARD.

YOU WOULD LOVE TO BE ABLE TO TALK TO EVERYBODY YOU POSSIBLY CAN. WE SORT OF
RAN INTO TIME PARAMETERS AS A PROBLEM. AND I WAS FRUSTRATED THAT THE TIMING,
THE WSIS EXERCISE WAS IN THE MIDDLE OF THIS PROCESS AS WELL WHICH ABSORBED
SOME OF OUR COMMUNICATION CAPABILITIES.

BUT THAT'S TO GIVE YOU SOME IDEA OF THE CONSULTATION THAT TOOK PLACE UNTIL
NOW.

BUT HERE IN VANCOUVER, AS VINT MADE CLEAR TO THE COMMUNITY, I THINK, THE
BOARD WANTED TO COME AND LISTEN AND ENSURE THAT THEY GOT ALL THE FEEDBACK THE
PEOPLE WANTED TO GIVE ON THIS PROPOSED SETTLEMENT AND CONTRACT.

THERE WAS A WORKSHOP AMONG ALAC, BUSINESS CONSTITUENCY, ISPS, REGISTRARS,
WITH STAFF AND SOME MEMBERS OF THE BOARD. INTELLECTUAL PROPERTY CONSTITUENCY
MET DIRECTLY WITH THE BOARD. THE BOARD MET DIRECTLY WITH THE NONCOMMERCIAL
CONSTITUENCY, WITH THE CCNSO DIRECTLY THIS MORNING AND WITH MYSELF YESTERDAY.
CROSS-CONSTITUENCY CONSULTATION, THERE WAS A BRIEF MEETING ON THIS ISSUE WITH
THE BOARD. THE REGISTRY CONSTITUENCY, REGISTRAR CONSTITUENCY, AND ALSO ALAC,
WHICH WERE MEETINGS BETWEEN THOSE CONSTITUENCIES FACE TO FACE WITH THE BOARD
MEMBERS. AND THAT HAS BEEN VERY VALUABLE. WE APPRECIATED THAT VERY MUCH.

WE HAVE BEEN SOLICITING, THE BOARD HAS BEEN SOLICITING, CONCISE ACTIONABLE
COMMENTS AND YOU HEARD SEVERAL BOARD MEMBERS MAKE THAT POINT OF -- I DON'T
WANT TO SAY IT'S EASY TO CRITICIZE, BUT WHAT'S MORE VALUABLE IS TO HAVE
ACTIONABLE COMMENTS RECEIVED. THOSE ARE STILL BEING RECEIVED AND PUBLIC
COMMENTS CONTINUING, AND PEOPLE ARE LISTENING VERY CAREFULLY.

WHAT THE STAFF AND MYSELF HAVE DONE FOR THIS PARTICULAR STAGE RIGHT NOW IS
TRY TO SYNTHESIZE INPUT RECEIVED BEFORE AND DURING THE VANCOUVER MEETING.

THIS COMPILATION THAT I'M GOING TO SHARE WITH YOU CAPTURES MUCH, PERHAPS NOT
ALL OF THE COMMENTARY. IT IS A GENERAL SUMMARY. IT'S NOT THE ONLY SUMMARY
THAT WILL BE AVAILABLE, BUT I JUST THOUGHT I WOULD SHARE WITH YOU NOW WHAT WE
HAVE HEARD TO DATE.

THE ORDER OF THE COMMENTS PRESENTED IS OF NO INDICATION OF THE RELATIVE
IMPORTANCE. THERE IS CLEARLY SOME DIVERSITY ON THESE ISSUES. THERE IS
BROADER AGREEMENT ON SOME ISSUES THAN ON OTHERS, AND THERE ARE COUNTERPOINTS
TO MANY OF THE CONCERNS. SO MANY OF THE CONCERNS RAISED, THERE ARE ACTUAL
RESPONSES TO THEM, BUT I'M NOT GOING TO GO THROUGH THAT.

I WANT TO JUST GIVE YOU A VERY CAREFUL READING OUT OF WHAT WE SO FAR HAVE
SUMMARIZED AS BEING THE COMMUNICATED ISSUES.

SO WE HAVE HAD COMMUNICATED PERCEIVED BENEFITS OF THE PROPOSED SETTLEMENT.
THEY ARE THE END TO LITIGATION WILL PROVIDE INCREASED STABILITY TO THE ICANN
ENVIRONMENT AND ELIMINATE A DRAIN ON RESOURCES THAT CAN BE BETTER USED
ELSEWHERE.

THE BINDING ARBITRATION PROVISION REDUCES CHANCES OF FUTURE COSTLY
LITIGATION.

ADDITIONAL RESOURCES PROVIDED TO ICANN IN THE AGREEMENT CAN BE UTILIZED TO
IMPROVE CONTRACTUAL COMPLIANCE EFFORTS AND OTHER IMPORTANT PURPOSES AS
DETERMINED BY THE COMMUNITY.

THE ROOT SERVER MANAGEMENT TRANSITION AGREEMENT HAS POSITIVE ASPECTS, BUT
ADDITIONAL OVERSIGHT MAY BE REQUIRED.

PRESUMPTIVE RENEWAL HAS POSITIVE ASPECTS THAT LEND THEMSELVES TO STABILITY.

THE MANNER IN WHICH NEW REGISTRY SERVICES ARE CONSIDERED WILL IMPROVE
TRANSPARENCY, PREDICTABILITY AND TIMELINESS.

NOW, LET ME GIVE YOU ALSO THE SUMMARY OF COMMUNICATED CONCERNS.

AND YOU WON'T BE SURPRISED TO KNOW THERE'S MORE OF THOSE THAN THE FORMER.

SO LET'S JUST GO TO ISSUES AROUND PRICE.

INCREASES IN PRICE SHOULD BE COST-JUSTIFIED, ESPECIALLY GIVEN THE DOT COM
MARKET SHARE.

A DISCOVERY OF COSTS IS NEEDED.

AN INDEPENDENT ECONOMIST SHOULD STUDY THIS MARKET AND THE EFFECTS OF VERISIGN
MARKET SHARE AND POTENTIAL PRICE CHANGES.

THE INCREASED PRICE WILL BE PASSED ON TO CONSUMERS WHILE THE EFFECT TO
INDIVIDUAL DOMAIN NAME HOLDERS MAY BE THE SAME.

THE SMALL BITS AMOUNT TO A SIGNIFICANT AMOUNT OF FUNDS TO BE TO BE RECEIVED
FROM THE USERS AS A WHOLE THAT GOES TO TWO PARTIES.

SETTLEMENT PUSHES COST TO THIRD PARTIES, REGISTRARS, RESELLERS, AND END
USERS.

DUE TO COMPETITIVE ASPECTS OF THE MARKETPLACE, REGISTRARS WILL BEAR COSTS OUT
OF DWINDLING MARGINS.

ON -- SUMMARY OF COMMUNICATED CONCERNS AND ICANN FEES AND RESOURCES.

THE SETTLEMENT RESULTS IN A LARGE INCREASE IN REVENUE FOR ICANN CONCENTRATED
IN ONE SOURCE, VERISIGN.

NOT A GOOD BUSINESS MODEL.

ENDANGERING ICANN INDEPENDENCE.

ICANN FEES ARE PASSED DIRECTLY ON TO REGISTRARS, WHO, DUE TO COMPETITIVE
ASPECTS OF THE MARKETPLACE, WILL BEAR THE COSTS OUT OF DWINDLING MARGINS
WHILE VERISIGN WILL NOT PAY FOR ANYTHING FOR THE LICENSE TO OPERATE THE
REGISTRY.

IF ICANN RECEIVES SIGNIFICANTLY MORE REVENUE, IT MUST SIGNIFICANTLY IMPROVE
TRANSPARENCY OF BUDGET AND REPORTING PROCESSES.

ICANN FUNDING IS A POLICY DECISION AND SHOULD NOT BE SET THROUGH BILATERAL
NEGOTIATION.

THE AGREEMENT ESSENTIALLY ELIMINATES THE CHECK AND BALANCE AGAINST ICANN
REVENUE INCREASES PROVIDED BY THE PRESENT APPROVAL MECHANISM.

POLICY DEVELOPMENT PROCESSES.

COMMUNICATED CONCERNS INCLUDE THERE ARE DIFFERENCES BETWEEN THE RESULTS OF
THE GNSO COUNCIL PDP FOR CONSIDERATION OF THE NEW REGISTRY SERVICES AND THE
PROPOSED CONTRACT PROVISION OF THE SAME, THAT IS, THE FUNNEL.

THE PROPOSED CONTRACT PROVIDES THAT THE FUNNEL CANNOT BE ALTERED FOR THREE
YEARS, AS A RESULT, THE PROCESS FOR DOT COM WOULD BE DIFFERENT FROM OTHER
REGISTRY CONTRACTS, EXISTING AND PROPOSED, SUSCEPTIBLE TO ABUSE BY VERISIGN
IF THE PROCESS IS DETERMINED TO BE FLAWED AFTER AN INITIAL PERIOD OF USE.

THE PROVISION FOR THE USE OF TRAFFIC DATA BYPASSES THE FUNNEL, ALLOWING
VERISIGN TO OFFER THE SALE OF THIS INFORMATION, A COMMERCIAL ASSET, WITHOUT
REVIEW BY ICANN.

OTHER ASPECTS OF THE AGREEMENT SHOULD BE THE PRODUCT OF A POLICY DEVELOPMENT
RATHER THAN A BILATERAL NEGOTIATION.

PRESUMPTIVE RENEWAL, PRICING AND ICANN FEES, THE USE OF TRAFFIC DATA.

LET ME TALK TO PRESUMPTIVE RIGHT OF RENEWAL AND THE SUMMARY OF COMMUNICATED
CONCERNS IS, THE PRESUMPTIVE RIGHT OF RENEWAL GRANTS VERISIGN THE DOT COM
REGISTRY IN PERPETUITY, PRECLUDING THE EXISTENCE OF REAL COMPETITION IN THE
SECTOR OF THE DNS FOR A LONG TIME.

THIS RIGHT, EXISTING IN THE PRIOR CONTRACT, DID NOT NEED TO BE CARRIED OVER
INTO THE NEW PROPOSED AGREEMENT.

THE FACTORS LISTED BY WHICH ICANN CAN EITHER TERMINATE THE PROPOSED AGREEMENT
OR REBID THE AGREEMENT AT ITS CONCLUSION HAVE BEEN WEAKENED IN COMPARISON TO
THE LAST AGREEMENT.

AND A SUMMARY OF OTHER CONCERNS WHICH HAVE BEEN COMMUNICATED.

TECHNICAL COORDINATION OF THE DNS IS A PUBLIC TRUST.

ICANN IS THE TRUSTEE.

VERISIGN IS A CONTRACTOR.

IT IS ICANN'S DUTY TO OPERATE THE TRUST FOR THE PUBLIC GOOD.

IN THIS CASE, PROTECTING THE MARKET FROM UNJUSTIFIED PRICE INCREASES THAT
WORK TO THE DETRIMENT OF EVERYONE EXCEPT VERISIGN.

PROMOTING COMPETITION BY WORKING TO REDUCE PRICES AND ELIMINATING PRESUMPTIVE
RENEWAL CLAUSES.

THE EXISTING AGREEMENT PROVIDES THAT VERISIGN PROVIDE A PROPOSAL FOR ICANN
CONSIDERATION NOT EARLIER THAN TWO YEARS PRIOR TO THE EXPIRATION OF THE
AGREEMENT, NOVEMBER 2005.

ICANN TAKE UP WITHIN SIX MONTHS WITHIN THE COMMUNITY TO REVIEW THE PROPOSAL.

THE RESULTING AGREEMENT SHOULD BE SUBSTANTIALLY THE SAME AS EXISTING REGISTRY
AGREEMENTS.

THE PROPOSED AGREEMENT NO LONGER CONTAINS A PROVISION THAT VERISIGN INVEST
$200 MILLION IN R & D AND INFRASTRUCTURE, AND THERE HAS BEEN NO REPORT ON
SPENDING TO DATE INDICATING THIS REQUIREMENT HAS BEEN SATISFIED.

THE PROCESS AND TIMING GOING FORWARD FOR CONSIDERATION OF THIS PROPOSAL HAS
NOT BEEN DEFINED.

THE PROCESS TO DATE HAS CONFUSED SETTLEMENT ACTIVITIES WITH THE CONTRACT
RENEWAL/RENEGOTIATION PROCESS.

THEY SHOULD BE HELD SEPARATE.

THE AGREEMENT CREATES THE EXISTENCE OF SPECIAL FUNDS FROM A PORTION OF THE
INCREASED REVENUE THAT MAY ALLOW ICANN TO SPEND WITHOUT APPROPRIATE COMMUNITY
REVIEW.

OTHER QUESTIONS WHICH HAVE BEEN POSTED OR ASKED.

HOW DOES THE SETTLEMENT PROMOTE ICANN CORE VALUES?

SHOULD ICANN BE IN THE BUSINESS OF SETTING PRICE CONTROLS OR SHOULD THE
MARKETPLACE PLAY A GREATER ROLE IN SETTING PRICES THROUGH REGISTRY AND
REGISTRAR COMPETITION FOR CUSTOMERS?

SHOULD ICANN FORCE VERISIGN AND ALL OTHER REGISTRY OPERATORS TO MEET SPECIFIC
LEVELS OF CAPITAL INVESTMENT, AND IF SO, WHAT LEVEL?

SO THAT'S A SUMMATION AS WE'VE HEARD IT TO DATE.

AND THAT'S JUST A SUMMATION BY STAFF.

IT'S NOT THE FINAL SUMMATION.

YOU CAN'T BELIEVE HOW MUCH SELF-CONTROL I HAVE EXHIBITED BY NOT RESPONDING TO
ANY ONE OF THOSE AS I'VE READ THROUGH THEM.

BUT THEY ARE ALL GOOD QUESTIONS, OF COURSE.

WHAT WE ARE NOW DOING IS WE ARE NOW OPENING THIS TO AN OPEN MICROPHONE
SESSION TO FOLLOW IMMEDIATELY.

AND I WOULD ENCOURAGE EVERYONE HERE AND THOSE WHO ARE ONLINE TO ASK -- IF
THERE ARE ANY OMISSIONS, IF YOU DISAGREE WITH ANYTHING THAT IS BEEN CAPTURED
OR YOU HAVE OTHER THINGS TO TELL US, WE'RE HERE TO LISTEN AND TO HEAR.

THE ICANN BOARD WILL CAREFULLY EXAMINE THE POINTS RAISED HERE PRIOR TO MAKING
ANY DECISION.

AND THE PROCESS FORWARD IS IN THE HANDS OF THE CHAIR AND THE BOARD.

SO, CHAIR, THAT'S A SUMMATION.

(A full transcript of this session may be found at <http://www.icann.org/meetings/vancouver/captioning-public-forum-i-02dec05.htm> . More information about the meeting may be found at <http://www.icann.org/meetings/vancouver/> .)

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