Reconsideration Request 02-5
Recommendation of the Committee
Date: 20 May 2003

Recommendation

A. Background

On 12 September 2002, Kevin E. Brannon, a lawyer acting on behalf of Dotster, Inc., submitted reconsideration request 02-5. In that request, Dotster requests that the Board reverse its decision in resolution 02.100 to authorize the President and General Counsel to conduct negotiations on behalf of ICANN toward appropriate revisions to the .com and .net registry agreements between ICANN and VeriSign, Inc., to provide for the offering of a wait-listing service (WLS) as proposed by VeriSign, with six additional conditions.

B. Procedural Requirements

Dotster's request was submitted during the evolution and reform process commenced by the ICANN Board in March 2002. Three weeks before Dotster's request, the community-based Accountability Framework Assistance Project issued its final "Recommendations Regarding Accountability" on 23 August 2002. That document detailed recommended revisions to ICANN's review mechanisms (including the reconsideration process) to conform to and implement the Blueprint for Reform adopted by the ICANN Board at its June 2002 meeting in Bucharest and particularly ICANN's reformulated Mission and Core Values. Both the Mission and Core Values and the substance of the "Recommendations Regarding Accountability" were incorporated in ICANN's New Bylaws approved by the Board on 31 October 2002, which became effective on 15 December 2003.

This recommendation and the Committee's recommendation concerning VeriSign's request RC 02-6 are the first recommendations made by the Committee since the New Bylaws became effective and thereby superseded the former Reconsideration Policy. The current reconsideration mechanism, as embodied in the New Bylaws, contains additional provisions that improve upon the former policy. It is understandable that the two pending requests, which were written with the now-superseded Reconsideration Policy in mind, do not contain all the elements that would be required by the current reconsideration mechanism. After reviewing Dotster's request, however, the Committee is satisfied that it contains sufficient information, when considered in conjunction with other publicly documented information, to allow proceeding to a recommendation without requesting Dotster to provide a supplemental submission.

C. Grounds for Request for Reconsideration

In item 7, Dotster's request argues that resolution 02.100 should be reversed on the following grounds:

ICANN's actions [sic] in approving the WLS proposal violates its contractual obligations under Sections 2.3.2 and 4 of [Dotster's Registrar] Accreditation Agreement.

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There are two primary reasons Dotster requests reversal of ICANN's decision, including the following: first, adoption of the WLS proposal violates ICANN's contractual obligations under the Accreditation Agreement; and second, the adoption of the WLS proposal contravened ICANN's processes established by the Accreditation Agreement.

Under Article IV, Section 2(2)(b) of the New Bylaws, an adversely affected party may seek reconsideration of a decision of the ICANN Board where the decision was taken without consideration of material information.¹ In approving resolution 02.100, the Board did not specifically consider whether amendment of ICANN's registry agreements with VeriSign would violate provisions of ICANN's registrar accreditation agreement with Dotster, or with any other registrar. Dotster's request therefore can be judged on whether the newly cited contractual provisions would have been material to the Board's decision.

D. Analysis of Grounds for Reconsideration

Like approximately 160 other registrars, Dotster has been accredited by ICANN through a registrar accreditation agreement. The provisions of that agreement are posted on ICANN's website. Dotster's contentions under the two asserted provisions are analyzed in turn below:

Subsection 2.3.2. The first provision of the registrar accreditation agreement cited by Dotster is subsection  2.3.2. That provision states:

2.3 General Obligations of ICANN. With respect to all matters that impact the rights, obligations, or role of Registrar, ICANN shall during the Term of this Agreement:

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2.3.2 not unreasonably restrain competition and, to the extent feasible, promote and encourage robust competition . . . .

Dotster asserts that, by authorizing VeriSign Registry to offer a WLS through accredited registrars, the Board's action will have "the effect of destroying competition between Registrars who currently offer services similar to those services that VeriSign is offering. Competition will be destroyed because all domain names that are being released will first be offered to WLS customers, before any Registrars will be able to potentially allow others to register the domain name that is being released. If the WLS proposal is implemented, Registrars will be unable to compete with VeriSign, which by design has preferential rights to register domain names." Dotster also argues that the price at which VeriSign proposed to offer the WLS to registrars is "well in excess of cost-plus reasonable profit."

Although Dotster's reference to subsection 2.3.2 of the registrar accreditation agreement is new, the arguments concerning competitive effects and pricing were presented to and thoroughly considered by the Board in adopting resolution 02.100. As noted in the minutes of the 23 August 2002 Board meeting, the Board recognized that many "registrars . . . saw the WLS as an erosion of competition."

The Board as a whole, however, was unpersuaded by those registrars' arguments. By authorizing VeriSign to offer a WLS, ICANN would remove impediments to competition, not create them. It may (or may not) be true, as Dotster argues, that its "NameWinner" service will not be able to compete effectively in the marketplace because consumers will instead purchase the WLS offering, which provides consumers greater security that their subscription will be fulfilled. It may (or may not) also be true that consumers will prefer the WLS to NameWinner because WLS will be offered through all registrars, while NameWinner is available only through Dotster.

Arguments that a proposed new service such as WLS will displace existing services because it is more attractive to consumers, however, do not demonstrate a threat to competition. Instead, they reflect the operation of competition. ICANN's core values support the introduction and promotion of competition, not the protection of competitors. See Core Value 6. This Core Value is in alignment with subsection 2.3.2 of the registrar accreditation agreement; it states that ICANN should promote "competition", not "competitors".

The Board's consideration of the effect on competition of authorizing VeriSign to offer the new service is demonstrated by resolution 02.100 itself. In adopting the resolution, the Board recited that it was "mindful that ICANN should act in a way that promotes consumer choice and innovative services while ensuring that registry operations are conducted in a manner that does not harm the legitimate interests of consumers or others." Because the substance of Dotster's competition arguments was thoroughly considered by the Board in adopting resolution 02.100, Dotster's renewal of these arguments (now shrouded in the contractual wrapper of subsection  2.3.2 of the registrar accreditation agreement) does not merit reversal of the Board's decision on reconsideration.

Section 4. Dotster's reconsideration request also asserts that ICANN's authorization of the offering of WLS "contravenes the procedural requirements for adopting a Consensus Policy, as required in the Accreditation Agreement." In a subsequent letter, Dotster's lawyer elaborated:

Section 4.2.4 provides that ICANN should establish principles for allocation of Registered Names pursuant to a Consensus Policy. ICANN violated Section 4 of the Accreditation Agreement when it adopted the WLS proposal as a Board action instead of following the procedures required in Section 4.3.1 of the Accreditation Agreement for a Consensus Policy.

Letter from Kevin E. Brannon to Paul Twomey Regarding VeriSign WLS (9 April 2003).

Dotster is correct that the Board's decision to revise VeriSign's registry agreements to allow it to offer the WLS through accredited registrars was not made according to the procedures stated in subsection 4.3.1 of Dotster's registrar accreditation agreement for the creation of "consensus policies" as defined there. But nothing in the registrar accreditation agreement requires ICANN to make all of its policies according to the "consensus policy" mechanism defined in that agreement.

Instead, the contractual role of the "consensus policies" under the registrar accreditation agreement is to provide ICANN with an alternative to require registrars to implement policies developed through the ICANN process. Under subsection 4.1 of the registrar accreditation agreement, registrars agree to comply with new or revised specifications developed during the term of the agreement, provided they are established according to a consensus policy process described in subsection 4.3 and on topics prescribed in subsection 4.1.2.² In contrast to Dotster's contention that the registrar accreditation agreement requires all of ICANN's policies to be created using the procedures stated in subsection 4.3.1, the registrar accreditation agreement makes it very clear that the consensus-policy mechanism is only one way of defining additional obligations for registrars. See subsection 4.2 ("specifications and policies may be established").³

In fact, the particular Board action challenged by Dotster does not involve any change in Dotster's obligations to ICANN under the registrar accreditation agreement. No provision of the registrar accreditation agreement is proposed to be revised. Instead, resolution 02.100 involves amendment of agreements on a different subject – operation of the .com and .net top-level domains – between ICANN and a different party – VeriSign. Nothing in the registrar accreditation agreement requires ICANN to create or revise the obligations of other parties under other agreements by using the consensus-policy mechanism for creation of registrar obligations as established in subsection 4.3.1 of the registrar accreditation agreement.

E. Recommendation

For the above reasons, the Reconsideration Committee recommends that the Board take no action on reconsideration request RC 02-5.

Notes:

1. Article IV, Section 2(2)(b) of the New Bylaws also states that a party may not submit a reconsideration request based on new information that the party "could have submitted, but did not submit . . . at the time of action or refusal to act." In view of Committee's conclusion that the new information would not have been material, it is not necessary to decide whether this restriction, which was not stated in the former Reconsideration Policy, should be applied to requests pending at the time the New Bylaws came into effect. It will be applied to all requests submitted after 15 December 2002.

2. As also made clear by section 4, this registrar obligation to abide by consensus policies does not limit the registrar's obligations to ICANN as set forth in other parts of the agreement.

3. A more detailed explanation of the various methods available to ICANN for implementation of policies by registrars and registry operators is given in the 20 October 2002 "General Counsel's Briefing Concerning Implementation of Policies by Registrars and Registry Operators".