.org Reassignment: Evaluation of Proposals Under Procedural Criteria (#2, #3, and #10)

Posted: 19 August 2002

.org Reassignment: Evaluation of Proposals Under Procedural Criteria (#2, #3, and #10)

Prepared by: Louis Touton
ICANN General Counsel
19 August 2002

ICANN’s current registry agreement with VeriSign, Inc. for the operation of the .org top-level domain (TLD) calls for responsibility for operating the .org TLD to be reassigned as of 1 January 2003. On 20 May 2002, ICANN issued a final Request for Proposals by organizations seeking to become the successor operator. As of the 18 June 2002 deadline, eleven proposals were received.

As part of the Request for Proposals, ICANN published “Criteria for Assessing Proposals,” which set forth eleven criteria that would be considered in evaluating and selecting from among the proposals received. Four of these criteria (#1, #7, #8 & #9) concern technical aspects of the proposals, such as the need to preserve a stable, well-functioning .org registry, which the ICANN Board has indicated will be given highest priority in the evaluation. Three other criteria (#4, #5 & #6) address the needs of non-commercial registrants consistent with the primary purposes of the .org registry. Yet another criterion (#11) involves the completeness of the proposals submitted and the extent to which they demonstrate realistic plans and sound analysis. Three teams were commissioned to evaluate the proposals under various sets of these criteria; each team prepared a report of its findings that has been posted.

This report concerns the three other criteria to be evaluated. Criterion 2 is largely a verification step that all bidders are expected to meet, so that it only needs to be applied to the proposal(s) likely to be selected based on the overall evaluation. If the selected bidder does not meet the requirements of that criterion, its proposal would need to be rejected and attention turned to the next highest-ranking proposal. Criterion 3 relates to enhancement of competition and is relevant mainly to bids involving relationships to the incumbent registry operator, and analysis of that criterion has been focused accordingly. Because criterion 10 is similarly relevant only to particular proposals (i.e. only those seeking to qualify for the VeriSign endowment), evaluation under that criterion has also been targeted.

A. Evaluation Under Criterion 2 (Compliance with ICANN-Developed Policies)

Criterion 2 of the published Criteria document states:

2. Ability to comply with ICANN-developed policies.

As a globally open TLD, the operation of the .org registry must comply with policies defined through ICANN processes, such as policies regarding registrar accreditation, shared registry access, the uniform dispute resolution policy, and access to registration contact data via Whois. Consideration will be given to the adequacy of mechanisms proposed for ensuring compliance with those policies.

Questions relevant to this criterion include C17, C17.1, C17.2, C17.3, C17.7, C17.8, C17.11, C17.12, C17.13, C17.16, C19, C21, C22, and C28.

The principal vehicles to implement policies in the operation of a TLD registry are entry and enforcement of Registry Agreements between ICANN and the registry operator. As part of the Request for Proposals, ICANN published a Model .org Registry Agreement, which details the registry operator’s obligations to implement ICANN-developed policies. Each applicant was advised in the instructions:

If your application is selected, you will be required to enter into a registry agreement with ICANN concerning your operation of the .org registry. The model form of the agreement is posted on the ICANN web site; please note that several appendices must be prepared and agreed between you and ICANN based on the details of your proposal. If agreement is not reached on the registry agreement and its appendices, ICANN reserves the right to make another selection of the organization that will become the successor operator.

Thus, the model agreement (already drafted) and its appendices (some already drafted and others to be prepared to reflect the terms of the selected proposal) provide the main mechanism by which the selected registry operator will be obligated to implement ICANN-developed policies.

In addition to the obligation to implement policies, however, it is important that proposals demonstrate the capability and disposition to implement them. The following proposals, which were placed in tier “A” by at least one technical team, were reviewed to determine whether they propose adequate mechanisms to promote voluntary compliance with ICANN policies, and otherwise indicate the bidder’s capability and disposition to comply:

• DotOrg Foundation
• GNR
• ISOC
• NeuStar
• RegisterORG

Based on the proposals (particularly items C19, C21, C22, and C28), each of the bidders propose mechanisms (such as dedicated compliance personnel) that should afford them the capability to comply with ICANN policies and each reaffirm their commitment to abide by ICANN policies.

Three of the five proposals (DotOrg, ISOC, and RegisterORG) listed above involve a back-end provider that has an ownership relationship with one or more registrars. This circumstance requires particular attention to compliance with ICANN requirements that all registrars receive equivalent registry access. The back-end providers involved, however, have demonstrated their ability to address these circumstances in connection with TLDs they already operate.

In sum, I conclude that all five proposals listed above demonstrate compliance with criterion #2.

B. Evaluation Under Criterion 3 (Enhancement of Competition)

Criterion 3 of the published Criteria document states:

3. Enhancement of competition for registration services.

One of ICANN's core principles is the encouragement of competition in the provision of registration services at both the registry and registrar levels. Promotion of that principle will be a criterion. As one illustration of this criterion, a major purpose of the reassignment of the .org registry is to diversify the provision of registry services by placing the .org registry under different operation than the .com and .net registries. Consideration will be given to the extent to which proposed arrangements are consistent with this purpose. As another illustration, applicants are encouraged to refrain from prohibiting non-affiliated providers of backend services from offering their services in connection with other applications.

Questions relevant to this criterion include C2, C8, C12, C13, C13.1, C13.2, C13.3, C13.4, C13.5, C13.6, C14, C21, C22, C25, C26, C27, C31, C32, and C33.

As is apparent from the text supporting criterion 3 quoted above, the reassignment of .org is in general a pro-competitive event, though the pro-competitive benefits might be mitigated by various features of particular proposals. (Note: Various competitive effects may also result from factors such as the introduction of innovative services and reductions in pricing. Those factors are addressed in criterion 7, which was evaluated by the technical teams.)

The text above gives two illustrations of proposal features that tend to diminish the pro-competitive benefits of reassignment:

• Where the proposal does not diversify the provision of registry services by placing the .org registry under different operation than the .com and .net registries.
• Where a proposal is shown to have prohibited a back-end provider from providing support for other proposals.

Only the first bullet above is analyzed in detail in this report. With the possible exception of a restrictive arrangement between UIA and VeriSign (that restriction does not affect the outcome of this analysis of criterion 3), there appears to be no evidence of lock-ups of the type stated in the second bullet, nor do the proposals appear to present other circumstances that significantly mitigate the pro-competitive benefits of reassignment of .org.

Of the eleven proposals received, only three appear to involve potentially relevant relationships with the operator of the .com and .net TLDs (VeriSign, Inc.): Global Name Registry; ISOC; and UIA. The following analyzes competitive considerations arising from these relationships:

Global Name Registry has a two-fold relationship with VeriSign. First, VeriSign Capital Management, Inc. is a minority (less than 10%) investor in GNR’s parent holding company. See GNR Proposal, item C33(b). VeriSign does not occupy a board seat nor is there any indication that its minority ownership gives it control over GNR’s operations. In these circumstances, it does not appear that this investment relationship undercuts the competitive benefits of reassignment of .org.

In addition to its minority ownership by VeriSign, GNR has entered an arrangement under which VeriSign provides principal registry services for .name, the TLD that GNR currently operates. This arrangement was implemented at the time that GNR went from batch-mode to real-time shared registry operations. In its .org proposal, GNR’s proposal pledges as follows:

Assuming a winning bid, aside from its role in transitioning the .org registry to Global Name Registry, Global Name Registry will not contract its backend services to VeriSign in connection with the continued operation and maintenance of the .org registry. Clearly, this type of arrangement would contravene the intent and spirit of the entire .org divestiture.

GNR Proposal, item C33(b). This pledge appears fully satisfactory to maintain the pro-competitive benefits of reassignment of .org and, if GNR is selected, it should be included in the Additional Covenants (Appendix W) of the Registry Agreement.

It should be noted, however, that an additional consequence of this pledge is that GNR does not propose to use the technology (that introduced through GNR’s collaboration with VeriSign’s) which has been used to provide real-time shared registration services for the .name TLD. Instead, GNR proposes to use technology it has developed and will develop without VeriSign’s collaboration. As to this non-VeriSign technology, GNR’s proposal discloses qualified experience, stating that it in its .name operations it “had put into place virtually all of the required infrastructure essential” for the .org registry before commencing its collaboration with VeriSign. In fact, the omission is real-time shared registry capabilities. The experience of other registries has proven that reliably providing these capabilities can be quite demanding.

ISOC’s back-end provider, Afilias, also has VeriSign as an investor. Afilias is organized as a consortium of eighteen gTLD registrars. VeriSign is a minority (5.6%) shareholder of Afilias as one of these registrars. Because the other Afilias shareholders are VeriSign’s competitors, however, VeriSign’s ability to exercise control over Afilias is effectively minimized and, indeed, no VeriSign employee has ever been elected to Afilias’ Board of Trustees/Directors. In these circumstances, it does not appear that this investment relationship undercuts the competitive benefits of reassignment of .org, particularly in view of the fact that the .org registry would be assigned to ISOC, not Afilias.

UIA proposes to subcontract with VeriSign Global Registry Services (the current operator of the .com, .net, and .org registries) to provide back-end registration services for the .org TLD. UIA has entered into a teaming agreement with VGRS under which VGRS will provide to Diversitas (UIA’s non-profit operating subsidiary) back-end registration services for the first three years of the Registry Agreement. At the end of the second year, UIA will recompete the services initially to be provided by VGRS, with a target implementation date for the recompetition of 1 January 2006. Although this recompetition will ultimately result in an increase in diversity over the present circumstances, that pro-competitive increase will be delayed by three years.

In view of the review described above, it appears that criterion 3 renders the UIA bid less attractive, but does not bear significantly on any of the other bids.

C. Evaluation Under Criterion 10 (VeriSign Endowment)

Criterion 10 of the published Criteria document states:

10. Ability to meet and commitment to comply with the qualification and use requirements of the VeriSign endowment and proposed use of the endowment.

To the extent that a proposal contemplates the availability of the VeriSign US$5 million endowment (see subsection 5.1.4 of the current .org Registry Agreement), the proposal should demonstrate that it meets the qualification and use requirements of that endowment. Proposals that employ the endowment should also include detailed commitments about the uses to which the endowment would be put, and consideration will be given to the extent to which those uses are consistent with the smooth, stable transition and operation of the .org TLD for the benefit of current and future .org registrants.

In view of the above description, the following issues are relevant to evaluation of this criterion:

• Does the proposal seek the VeriSign endowment?
• If so, does the proposal appear qualified to receive it?
• If the proposal seeks the VeriSign endowment, what effects would failure to obtain the endowment have on the bidder’s ability to meet the requirements of its proposal?

Questions relevant to this inquiry include C2, C3, C4, C13, C13.1, C13.2, C13.3, C14, C41, C41.1, C41.2, C50.1, C50.2, and C50.4.

The following table summarizes my review of the above issues for each proposal:

Key to codes in “Appears Qualified?” column:

A=Appears likely to be qualified, with perhaps minor modifications, to receive the endowment.
B=Some issues regarding entitlement to the endowment; non-fundamental modifications to proposal may be necessary.
C=Raises significant concerns regarding entitlement to the endowment, which may require substantial revision to address.

As can be seen from the above table, only two bids raise significant issues under the VeriSign endowment. A failure of those bidders to receive the endowment as projected would somewhat reduce the attractiveness of their proposals, but should not significantly affect the provision or pricing of the services currently provided in the .org registry.

Because several issues beyond ICANN’s control may affect the entitlement of a bidder to receive the entitlement as projected, steps should be taken to ensure that it is clear that bidders assume all risks of not receiving endowment funds. Although in the model .org Registry Agreement ICANN makes no warranties as to the endowment, the selected applicant should be required to expressly assume all risks of non-receipt of the endowment.

Respectfully submitted,

Louis Touton
ICANN General Counsel