ICANN|ARCHIVES

Internet Corporation for Assigned Names and Numbers

28 February 2006: Today, the ICANN Board voted to approve the settlement with VeriSign, which includes the new .COM registry agreement. We, the undersigned members of the ICANN Board, have asked that this additional statement accompany ICANN's announcement of the Board's decision.

We wish to thank the numerous members of the ICANN community for submitting their thoughts regarding the two different posted versions of the proposed settlement and registry agreement. Those comments sharpened the focus of our debate considerably and in some instances resulted in ICANN obtaining additional favorable changes in terms, as set out in the Summary of Revisions to the Proposed Agreement, posted at http://www.icann.org/topics/vrsn-settlement/revision-matrix-09feb06.pdf .

We recognize that many members of the community have communicated their opposition to the new registry agreement for various reasons. This made our decision even more challenging, but in the end, our responsibility is to the entire Internet community, and we have made our decision with that community at the forefront of our thoughts.

Our decision to approve the proposed agreement was made based on many factors, but we wanted to highlight four of those factors.

First, while some opposed the new registry agreement because of the terms of the "renewal" clause, in truth, the renewal clause in the new agreement is little changed from the 2001 .COM agreement. In 2001, ICANN agreed to give VeriSign a presumptive right of renewal for .COM in return for VeriSign's agreement to give up the right to operate .ORG and to agree to a competitive bidding process for the renewal of .NET. ICANN made that decision because it believed that it was very unlikely and not necessarily desirable that the .COM registry operator would change, absent very extreme circumstances, and thus conceding that point (in return for concessions by VeriSign that were viewed as having real value) was conceding very little as a practical matter. The new agreement, again as a practical matter, merely clarifies this point, and does not, in our judgment, make any substantive change. Thus, this is not a reason to oppose this new agreement.

Second, while we recognize that the litigation with VeriSign could, if resolved entirely in ICANN's favor, affect VeriSign's rights under the 2001 agreement, we are hesitant to spend millions of more dollars in litigation, and the associated time of ICANN's staff and Board and outside counsel, attempting to obtain what we believe ICANN already has obtained in the new .COM agreement. Indeed, insofar as the disputes that lead to the litigation with VeriSign, the new agreement resolves those disputes entirely in ICANN's favor and gives ICANN the rights it has always claimed it had with respect to VeriSign's operations and, in particular, VeriSign's right to introduce new Registry Services. In short, we are hard-pressed to decline to accept a settlement of litigation that, for all practical purposes, gives ICANN all the relief that it could hope to obtain from the existing litigation.

Third, many objections have been raised regarding the process of obtaining a settlement with VeriSign. These objections seem to be the following: the reasons for the inclusion of the .COM Registry Agreement in the settlement agreement structure, the private nature of the negotiations, and the lack of community participation in the negotiations. The .COM Registry Agreement is included in the settlement because it is the focal point of the legal conflict between ICANN and VeriSign and it would be impossible to remedy the outstanding issues without creating a new .COM Registry Agreement. Also, it is recognized by the Board that a private negotiation process was an essential element of ICANN’s ability to obtain an agreement. As to the private nature of the negotiations, VeriSign is a publicly held company and it was reasonable for them to not want to negotiate a settlement to a lawsuit in public. Also, it did not seem likely that ICANN would be able to obtain a community consensus on how to approach VeriSign to resolve these disputes and even if ICANN tried the consensus process it is unsuited for the negotiation of an agreement with a third party. The new agreement is consistent with all existing gTLD and other ICANN policies. Additionally, it is impossible and was never contemplated that the community would be able to participate in the negotiation of the terms of each registry agreement. An important element of these negotiations has been the knowledge that the settlement documents would be posted for public comment and were on two different occasions before we reached this approval. Following the first set of public comments, this board authorized ICANN staff to negotiate further modifications based upon the feedback. It is also important to note that approval of the 1999 and 2001 versions of the .COM registry agreements followed a similar approval and public comment process. Accordingly, we have reviewed these process related objections and are confident that the process followed was necessary in order to end this long-standing dispute and litigation.

Finally, we appreciate the community's concerns regarding the price of .COM names. However, we firmly believe that ICANN is not equipped to be a price regulator, and we also believe that the rationale for such provisions in registry agreements is much weaker now than it was at the time the VeriSign agreement was originally made in 1998. At that time, VeriSign was the only gTLD registry operator, and .COM was, as a practical matter, the only commercially focused gTLD. Today, there are a number of gTLD alternatives to .COM, and several ccTLDs that have become much stronger alternatives than they were in years past. In addition, the incredibly competitive registrar market means that the opportunities for new gTLDs, both in existence and undoubtedly to come in the future, are greater than they have ever been. It may well be that .COM offers to at least some domain name registrants some value that other registries cannot offer, and thus the competitive price for a .COM registration may well be higher than for some alternatives. But price is only one metric in a competitive marketplace, and relative prices will affect consumer choices at the margin, so over time, we expect the registry market to become increasingly competitive. One way to hasten that evolution is to loosen the artificial constraints that have existed on the pricing of .COM and other registries. We began this process with the .NET agreement, and we now continue it with the .COM agreement, and we expect to continue along this path as we renegotiate agreements with other registries.

In order to protect existing registrants from adverse consequences during this transition period, we have adopted various devices. In the proposed .COM Registry Agreement, we have created different transition devices, including a six-month notice period and the right to enter into ten-year registrations at the existing price. In addition, the modifications in the agreement following the initial community reaction will further limit the amount of price flexibility that VeriSign will have over the life of the contract. To the extent any registry operator charges a price that consumers view as inconsistent with the value offered by that registry, the alternatives available in the market will generate the necessary market adjustments.

Again, we thank the members of the global Internet community for their input with respect to this difficult decision. We believe the decision is in the best interests of the Internet and its stakeholders.