ICANN | Reconsideration Request 06-1

Recommendation of the Reconsideration Committee
Reconsideration Request 06-1
30 March 2006

A. Background

On 10 March 2006, Jonathon Nevett, Vice President and Chief Policy Counsel for Network Solutions, submitted on behalf of 19 registrars a joint request that ICANN reconsider its 28 February 2006 vote approving the VeriSign settlement. See Joint Request for Reconsideration and Emergency Relief . On 16 March 2006, the parties submitted an Amended Reconsideration Request, adding four additional registrar parties to the request. See Amended Reconsideration Request 06-1 (hereinafter, the "Request"). The Request specifically asks that the Board "stay the decision and revote after receiving input from the DOJ . . . as well as other experts on competition and security issues."

B. Procedural Requirements

Article IV, Section 2.2 of ICANN's Bylaws states in relevant part that a person or entity may submit a request for reconsideration or review of an ICANN Board action or inaction only if the following factors have been met:

the person or entity was adversely affected,
by one or more actions or inactions of the ICANN Board,
that was taken or refused to be taken without consideration of material information.

Even if each of these factors are present, however, the Bylaws do not provide for reconsideration if "the party submitting the request could have submitted, but did not submit, the information for the Board's consideration at the time of action or refusal to act." Bylaws, Art. IV, § 2.2. Similarly, the Bylaws do not provide for reconsideration of material information that was considered by the Board. Bylaws, Art. IV, § 2.2(b) (stating that reconsideration addresses Board actions "taken without consideration of material information . . .").

The Bylaws require that any request for reconsideration include, among other things, "a detailed explanation of the material information not considered by the Board and, if the information was not presented to the Board, the reasons the party submitting the request did not submit it to the Board before it acted or failed to act." Bylaws, Art. IV, § 2.6(h). Moreover, the requesting party must provide "any documents the requesting party wishes to submit in support of its request." Bylaws, Art. IV, § 2.6(k).

Dismissal of a request for reconsideration is mandatory if the Reconsideration Committee finds that the requesting party does not have standing (as described above). The Reconsideration Committee may also dismiss a request "where it is repetitive, frivolous, non-substantive, or otherwise abusive, or where the affected party had notice and opportunity to, but did not, participate in the public comment period relating to the contested action, if applicable." Bylaws, Art. IV, § 2.16. In sum, these standing requirements are intended to ensure that the reconsideration process is not simply a request to change a decision that someone disagrees with, but is limited to situations where the Board did not have access to information that, if available, could have resulted in a different decision. It is not just a second bite at the apple.

C. Grounds for Request for Reconsideration

The Request asks that the Board reconsider its 28 February 2006 vote on the grounds that the following information was material to the Board's approval of the .com settlement (including the 2006 .com Registry Agreement) and was not considered by the Board in reaching that decision:

"[K]ey facts about VeriSign's market position" — although the Request does not identify any such "key facts." Request, p.2.
"[M]aterial information concerning the potential adverse effects that the settlement would have on competition" — although the Request provides no such "material information." Request, p.2.
That "well-established economic theory predicts that VeriSign will raise prices as long as those price increases are profitable" — although the Request does not describe nor state what economic theory the requesting parties reference. Request, p.3.
Comparing the "registration results" between .info and .com to help determine whether "prices affect consumer choices long before one reaches 'the margin'" — although the Request does not provide the information or demonstrate how it would support the requesting parties' conclusion. Request, p.4.
That it is "highly likely that registrants would continue to pay significantly higher prices to maintain their .com names instead of switching to less desirable TLDs" — although the Request again does not provide any material information to support this statement. Request, p.4.
That the Board should have considered the "policy of tying the status of competitive measures to deregulation," which the Request alleges has parallels in the 1996 U.S. telecommunications deregulation and Article 7 of the European Union Framework Directive. Request, p.5.
That the "ICANN Board should have received the views of . . . the Antitrust Division of the U.S. Department of Justice (DOJ) prior to voting to approve the settlement." Request, p.5 (emphasis in original). The Request later clarifies that it is specifically referring to the DOJ's views on "pricing." Request, p.10.
That the Board did not "consider empirical evidence that accurately reflects market dynamics." Request, p.6. The Request states that this information includes: (i) "wholesale prices to resellers, bundled pricing with other services, or recent pricing promotions" — all of which the Request states would demonstrate that "many registrars already passed on .net savings to their customers"; (ii) that "most registrars sell all gTLD domain names on their storefronts for the same price per name regardless of TLD," and thus "the retail price for all domain names will increase if VeriSign were to exercise its unilateral right to raise .com fees . . ."; and (iii) "the impact of the settlement on the vibrant competitive registrar marketplace." Request, p. 7 (emphasis in original). Again, the Request does not provide any information to support these statements.
A comparison of the "proposed presumptive renewal agreement" to the "2001 agreement." Request, p.7. The Request provides a chart outlining alleged differences.
That "ICANN's agreements with all other gTLD registry operators — except VeriSign — require ICANN to act as a price regulator." Request, p.8.
That the Board has the option of "obtaining professional support to discharge its price regulation obligations," because "[n]umerous third-party entities provide rate regulation services, including large accounting and consulting firms." Request, p.8.
That the Board did not consider "VeriSign's own claim about the cost efficiency of the new ATLAS infrastructure the .com registry now runs on," which the Request alleges demonstrates that "[t]here are no cost justifiable price increases." Request, p.8.

D. Analysis of Grounds for Reconsideration

It is the opinion of the Reconsideration Committee that none of the grounds for reconsideration stated above supports reconsideration.

First, most of the information that the Request refers to was presented to and discussed by the Board at length prior to its 28 February 2006 vote. In particular:

The Board spent considerable time discussing VeriSign's market position and the rationales in favor of, and in opposition to, ICANN's role as a price regulator generally and specifically with respect to VeriSign, including whether VeriSign should have the ability to raise the price of .com names (and in what amount).
The Board was informed of staff's discussions with the Department of Commerce and the Department of Justice regarding the earlier draft of the registry agreement.
The Board discussed at length the renewal provisions of the 2001 .com agreement and compared them to the renewal provisions of the new agreement.

Second, at least seven of the parties jointly submitting the Request provided essentially the same or similar information to the Board prior to the Board's decision to approve the VeriSign agreement. See, e.g., 14 February 2006 Letter from Registrars to Vinton G. Cerf (requesting that the ICANN Board not approve the proposed settlement agreement on various grounds, including the proposed pricing provision and the alleged perpetual management rights).

Third, the Request fails to demonstrate — as it must under the Bylaws — how any of the information not considered by the Board might have been material to its decision. For example, the requesting parties do not: (i) provide any alleged "key facts about VeriSign's market position" (Request, p.2); (ii) provide any alleged "material information concerning the potential adverse effects that the settlement would have on competition" (Request, p.2); (iii) state what economic theory the requesting parties rely on to support their statement that "well-established economic theory predicts that VeriSign will raise prices as long as those price increases are profitable" (Request, p.3); (iv) state what information they possess to support their claim that it is "highly likely that registrants would continue to pay significantly higher prices to maintain their .com names instead of switching to less desirable TLDs" (Request, p.4); or (v) purported "empirical evidence that accurately reflects market dynamics" (Request, p.6).

Finally, and most importantly, the Request fails to demonstrate — as it must under the Bylaws -- why the requesting parties could not and did not bring this information to the Board's attention prior to its 28 February 2006 approval of the settlement. To the contrary, the requesting parties had ample opportunity to bring this information to the Board's attention, including the two public notice periods that the Board established for comment on the October 2005 version of the proposed agreement and the January 2006 version of the agreement. The only information that the requesting parties state they could not provide was the views of the DOJ on pricing. Request, p.9 ("The community was unable to provide the views of the DOJ during the comment period — ICANN must solicit such input either directly or indirectly from the Department of Commerce."). But these views (to the extent available and relevant) were received by the Board and the issues were, in fact, discussed at length.

E. Recommendation

For the above reasons, the Reconsideration Committee recommends that the Board take no action on reconsideration request RC 06-1. The Committee concludes that there are no grounds to proceed, as each of the grounds was either: (i) already considered by the Board or (ii) could have been brought to the Board's attention prior to the 28 February 2006 approval. Moreover, the Request should be denied for the additional reason that much of the Request fails to provide any information at all, let alone demonstrate how the purported information is material.