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Internet Corporation for Assigned Names and Numbers

ICANN Bucharest Meeting Topic: VGRS Proposal for Wait-Listing Service

One topic that will be discussed at the ICANN Public Forum to be held in Bucharest, Romania on Thursday, 27 June 2002, is a proposal by VeriSign Global Registry Services (VGRS) to establish, on a twelve-month trial basis, a "Wait-Listing Service" (WLS) for the .com and .net top-level domains. At its meeting on 22 April 2002, the ICANN Board invited comments from the Internet community, both at the Bucharest Public Forum and over the Internet, regarding whether VGRS's proposal should be approved.

Background and Summary of the WLS Proposal

On 21 March 2002, VGRS submitted to ICANN a request that Appendix G to the .com and .net registry agreements between ICANN and VeriSign be amended to allow for a twelve-month trial of the VGRS proposal for establishing a WLS. Appendix G to the registry agreements governs the maximum prices VGRS may charge to registrars for "registry services" – those services that are provided as part of VGRS's status as the sole operator of the registry for .com and .net. Because VGRS proposes to charge for the WLS service during the twelve-month trial, it is seeking an amendment to Appendix G.

VGRS's current proposal grows out of a WLS proposal that it sent to the DNSO Registrars Constituency on 30 December 2001. After comments from that constituency and others, VGRS revised its proposal on 28 January. After additional discussions with registrars and others, VGRS revised the proposal a second time and submitted it with the 21 March 2002 request for amendment to Appendix G.

VGRS proposes to offer the proposed WLS at the registry level by using technology supplied by SnapNames, a company that currently has arrangements with some registrars to provide a roughly similar service at the registrar level. In summary, the WLS currently proposed by VGRS would operate as follows:

1. Acting on behalf of customers, accredited registrars could place reservations for currently registered domain names in the .com and .net top-level domains. (In view of its impending reassignment, .org would not be included.) Only one reservation would be accepted for each registered domain name. Each reservation would be for a one-year period. Registrations for names would be accepted on a first-come/first-served basis, with the opportunity for renewal.

2. VGRS would charge the registrar a fee, which would be set at US$35.00 for a one-year reservation, but there would be rebates to qualifying registrars of US$7.00 (until an industry-wide threshold of 250,000 WLS subscriptions is reached) or US$11.00 (after that threshold is reached), meaning that participating registrars would pay an effective rate of US$28.00, going down to US$24.00, for a one-year reservation in fulfillment of a customer's subscription.

3. The registrar's fee for customer subscriptions would be established by the registrar according to competitive market conditions.

4. In the event that a registered domain name is deleted from the registry (after all grace periods expire), VGRS would first check to determine whether a reservation for the name is in effect.

a. If there is a reservation, VGRS would assign the name to the registrar, charging the US$6.00 annual registration fee to the registrar. The registrar would register the name to the customer, charging a fee determined by agreement of the registrar and customer.

b. If there is no reservation, VGRS would delete the name from the registry, so that the name is returned to the pool of names equally available for re-registration through all registrars on a first-come/first-served basis.

5. There would be no change in the conditions under which names are deleted. In other words, names would only be deleted from the .com and .net registries when a registrar explicitly deletes them.

VGRS has proposed to implement the WLS for a twelve-month trial. At the end of the trial, ICANN and VGRS would evaluate whether the service should be continued. In the event the WLS is not continued, reservations extending beyond the trial would be honored.

As noted above, several registrars are providing wait-listing services of various kinds at the registrar level. Some of these services are being provided by arrangements between registrars and SnapNames; others are being provided by competitive offerings. In essence, under all of these services the registrars watch for a desired name to be deleted and immediately seek to register it. With respect to registrars currently offering this type of service through SnapNames' "SnapBack" service, VGRS proposes a special transitional arrangement:

"On the WLS launch date, any domain name that has an existing SnapBack subscription would be excluded from the WLS system, meaning that no one, including SnapNames or registrars who license SnapNames' technology, can take out a WLS subscription for that domain names so long as an active SnapBack subscription is in place. SnapNames, the registrars, and any individuals interested in a particular domain name would continue to compete for it as they do today."

VeriSign GRS Responses to Domain Name Wait Listing Service Questions (15 February 2001), response 18.

VGRS has not proposed to exclude names presently involved in non-SnapNames services from the WLS.

History of Discussion of WLS Proposal

VGRS first made its WLS proposal by sending it to the Registrar Constituency. The reaction from the members of the Registrar Constituency was overwhelmingly negative. Although not initially consulted by VGRS, on 18 January 2002 the Intellectual Property Constituency sent VGRS comments about the proposal. There also was some discussion on the DNSO general assembly mailing list.

On 28 January 2002, VGRS issued a revised WLS proposal. Significant revised features included:

• VGRS's price for the service was lowered from US$40.00 for a one-year reservation to the presently proposed levels of US$35.00, with rebates as described above.
• Possible terms for registrars' agreements with their customers were included based on feedback from the Intellectual Property Constituency.

The 28 January revised proposal also included procedural guidelines and a schedule for continued discussion of the proposal, including a question-and-answer period. VGRS received many questions from various persons and groups, and on 15 February VGRS posted responses.

Discussion continued, primarily within the Registrars Constituency and on the general assembly mailing list. Various registrars and others posted position papers in connection with the Registrars Constituency's consideration of its position on the proposal. On 10 March 2002, the Registrars Constituency adopted a resolution opposing implementation of the WLS and urging ICANN to withhold permission for its implementation. A minority of the registrars submitted a statement supporting implementation of WLS (18 registrars were listed as signatories of this statement, but the support of some of these registrars has been disputed).

On 21 March 2002, VGRS submitted a revised version of the proposal (there were no significant substantive changes from the 28 January 2002 version) to ICANN, seeking an amendment of Appendix G. The 21 March submission was accompanied by an analysis of the comments, prepared by VGRS on 20 March 2002.

At the Accra meeting, the DNSO General Assembly and Names Council Transfer Task Force conducted a meeting on a variety of issues concerning deletes, including the WLS.

After VGRS submitted its proposal to ICANN on 21 March 2002, the ICANN General Counsel prepared and posted an Analysis of VGRS's Request for Amendment to Registry Agreement. VGRS submitted a response, which ICANN also posted. On 22 April 2002, the ICANN Board adopted the following resolutions concerning the process for considering the WLS proposal:

Whereas, on 21 March 2002 VeriSign, Inc., the operator of the .com and .net registries, requested amendments to the registry agreements for those top-level domains to allow it to charge registrars an annual subscription fee of US$35.00 (with rebates of US$7.00 or US$11.00 depending on volume) for providing a proposed wait-listing service (WLS);

Whereas, this proposal has been discussed in various forms within the ICANN community since 30 December 2001, prompting both opposition and support from various segments of the community;

Whereas, the Transfers Task Force within the DNSO has undertaken a review of issues raised by deletion practices (including the WLS proposal) in the context of its analysis of transfers, and is scheduled to submit its final report for public comment in May, so that the Names Council can provide a final report to the Board in June;

Whereas, the Board believes that the report of the Transfers Task Force will be of assistance in evaluating the VeriSign WLS proposal;

Whereas, on 17 April 2002 the General Counsel presented an analysis to the Board concluding that it is plausible that legitimate interests of others could be harmed by the proposed amendments, so that more than a "quick-look" analysis is appropriate and the formal consensus-development processes currently established within ICANN should be employed to determine whether the amendment should be approved;

Whereas, the Board concludes that, before acting on VeriSign's request for amendment of the .com and .net registry agreements, it would be helpful to receive community comment on the request, and particularly on policy concerns raised by the request that would harm the legitimate interests of others;

Resolved [02.53] that the Board requests the Names Council to coordinate within the DNSO a comprehensive review of issues concerning the deletion of domain names and possible solutions for those issues and to submit to the Board, no later than 10 June 2002, a status report on that review, with the status report to include any recommendations (with supporting materials) concerning VeriSign's request to modify the .com and .net agreements to allow it to provide a wait-listing service, for a fee, as part of its operation of the .com and .net registries;

Resolved [02.54] that the Secretary is directed to advise the Address and Protocol Councils of VeriSign's request and the Board's intent to consider that request at its Bucharest meeting on 28 June 2002, with an invitation to those councils to submit comments (if any) on the request before that time;

Resolved [02.55] that the Board invites public comments on VeriSign's request and directs that a suitable mechanism be established for allowing comments to be submitted over the Internet to ICANN for at least a thirty-day period; and

Resolved [02.56] that the Board invites comments on VeriSign's request at the Public Comment Forum to be held on 27 June 2002 in Bucharest, Romania.

On 24 April 2002, the DNSO Names Council referred the Board's request for DNSO comments to the existing DNSO Transfers task force. That task force is conducting its work by telephone conferences and an e-mail list (archived here).

The DNSO Transfers Task Force submitted a status report to the Names Council, which forwarded it to the ICANN Board on 10 June 2002.

Legal Considerations

The WLS proposal raises the issue of whether Appendix G of the .com and .net registry agreements should be amended so that VeriSign can charge for the service during the twelve-month trial period. Some legal considerations are relevant to this issue:

New Registry Services Under uTLD Registry Agreements

VGRS has requested that Appendix G to the .com and .net Registry Agreements be amended. That appendix specifies the maximum price that VGRS may charge for "Registry Services." Registry Services are defined as those that are "provided as an integral part of the operation of the Registry TLD". In essence, "Registry Services" are those that a registry operator is enabled to provide on a sole-source basis by virtue of its appointment as such by ICANN, rather than services that are provided on a freely competitive basis. The proposed WLS is a registry service because, unlike the wait-listing services provided competitively by registrars, it is implemented by bypassing the normal return of deleted names to the available pool and by instead assigning them to the registrar and customer holding the reservation. In this way, the proposed WLS would become integrated into the operation of the .com and .net registries.

Special Role of U.S. Commerce Department in the VeriSign Agreements

Under Amendment 3 to its Memorandum of Understanding with the U.S. Department of Commerce, ICANN must obtain approval of changes to its registry agreements with VeriSign:

1. The agreements entitled ".com Registry Agreement," ".net Registry Agreement," and ".org Registry Agreement" between ICANN and VeriSign, Inc. and relating to the provision of registry services for the .com, .net, and .org registries are hereby approved by the DOC in substitution for the Registry Agreement between ICANN and Network Solutions, Inc., effective date November 10, 1999. ICANN will not enter into any material amendment of, or substitution for, said agreements, nor will said agreements be assigned by ICANN, without prior approval of the DOC.

(This approval requirement does not apply to ICANN's agreements with the new TLDs.)

Considerations in Evaluating Proposed New Registry Services

ICANN has not yet developed a well-defined procedure for considering requests by registry operators to amend Appendix G to allow charging for an additional registry service. Because action on VGRS's proposal may serve as a model for future actions, it is important to carefully consider the process that should be followed.

On one hand, the registry operator is in a sole-source position in providing registry services; this position carries with it the potential for various types of harm to the legitimate interests of others.

On the other hand, requiring a consensus-development process for every new registry service could stifle innovation. Registry operators should be encouraged to introduce new services to the marketplace where no legitimate interests of others are being materially harmed.

To accommodate these countervailing considerations, in considering requests to amend a registry agreement to authorize charging for additional registry services, the ICANN General Counsel has stated that a preliminary "quick-look" evaluation should be made to determine whether it is plausible that the legitimate interests of others could be harmed by the proposed amendment. If no legitimate interest appears in danger of being harmed, then a streamlined procedure for approval should be followed. If, however, there are specific reasons to conclude that the legitimate interests of others are likely to be harmed, then ICANN's existing obligation to seek consensus whenever possible before acting suggests that it should invoke the formal consensus development mechanisms that currently exist prior to any decision by the ICANN Board.

Special Topics for Discussion

Several concerns have been raised by the Registrar Constituency and others regarding VGRS's request for an amendment allowing charging for WLS on a twelve-month trial basis. Some of these concerns are:

1. Displacement of existing registrar-level competition. Currently, different registrars offer a variety of services to customers waiting for domain-name registrations to be deleted. These different services, which are currently offered on a competitive basis, all work on the basis of promptly registering names once they are returned to the available pool after deletion. Because the registry-level WLS would divert deleted names from being returned to the available pool, it would "trump" all of the competitive registrar-level services.

In general, the introduction of registrar-level competition has been extremely successful, and care should be taken before a registry operator is allowed to displace that competition by exercising abilities it has acquired by virtue of being designated the registry operator.

In the specific case of WLS, however, it is quite possible that some of the technically harmful effects of the registrar-level services (such as the high registry loads caused by "add storms") may justify instituting a registry-level WLS. It is also quite possible that the consumer benefits of having a guaranteed effective reservation (which can not be done at the registrar level) make it appropriate to allow registry-level WLS. It does not appear to me that a consensus position on these issues has yet developed in the community.

Comments are invited on any technical advantages or disadvantages of introducing a registry-level WLS on a trial basis.

2. Selective "grandfathering." Objections have been raised to the preferential transition arrangements proposed for the current SnapBack service, but not for any of the current services with which it competes. Since only some registrars are currently offering the SnapBack service, this proposed preference raises questions as to whether equivalent access would be accorded to all registrars. Comments are invited on what arrangements are appropriate to accommodate arrangements that consumers have made with the existing registrar-level services.

3. Basis for pricing. Many in the community believe that the price for the proposed WLS service should be limited to a cost-plus-reasonable-profit basis. Registrars, in particular, have indicated that the proposed price is several times likely costs. Maximum-price limits are intended to ensure that a registry operator does not abuse the sole-source position it achieves through its registry agreement with ICANN. Making judgments about appropriate maximum prices requires consideration of many factors, such as whether any effective market-based mechanism will be present for constraining price. On the other hand, the argument that the only true market test of the appropriateness of the product and its costs is its reception by potential purchasers would support VGRS's suggestion for a trial period after which a more informed evaluation could be made.

Community comments on the above concerns are specially invited, as are comments on other concerns that are not mentioned above.

In addition, the ICANN Board would appreciate comments on the following additional topics:

4. Standards for consideration of proposed new charges for registry services. Is the framework outlined above in "Considerations in Evaluating Proposed New Registry Services" appropriate? If not, what adjustments to this approach should be made? Are there additional factors that should be considered? How can the process for introducing new registry services best be streamlined while still protecting the legitimate interests of others affected? What role should the DNSO have?

5. Effects on the larger problem of name deletions. The current system for handling deletions of names in the uTLDs is the source of many complaints. Some domain-name registrants have suffered from inadvertent deletions, while other would-be registrants are frustrated at delays in deletion of expired names. Comments are invited on the relationship and likely effects of the WLS proposal on these problems.

Links to Documents

The following links to documents may be helpful:

• Appendix G to the .com Registry Agreement (Effective 25 May 2001)
• Appendix G to the .net Registry Agreement (Effective 25 May 2001)
• Amendment 3 to its Memorandum of Understanding Between ICANN and the U.S. Department of Commerce (Effective 25 May 2001)
• VGRS Proposal to Registrars (30 December 2001)
• IPC Comments Regarding the WLS (18 January 2002)
• VGRS Revised Proposal (28 January 2002)
• VGRS Justification for a Registry-based Wait Listing Service (28 January 2002)
• VeriSign GRS Responses to Domain Name Wait Listing Service Questions (15 February 2002)
• Registrar Constituency Position Paper and Resolution (10 March 2002)
• VGRS Analysis of Comments on WLS Proposal (20 March 2002)
• VGRS Proposal to ICANN (21 March 2002)
• General Counsel's Analysis of VGRS's Request for Amendment to Registry Agreement (17 April 2002)
• VGRS Response to General Counsel's Analysis of VGRS's Request for Amendment to Registry Agreement (21 April 2002)
• ICANN Board Resolutions on WLS (22 April 2002)
• DNSO Names Council Meeting Minutes (24 April 2002) (referral of WLS issues to Transfers Task Force)
• DNSO Status Report Regarding Deletions, Solutions, and WLS (forwarded to ICANN Board 10 June 2002)