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May 18, 2003
Robin Layton
Associate Administrator
Office of International Affairs
National Telecommunications and Information Administration
U.S. Department of Commerce
Tel: 202-482-1866
Fax:202-482-1865
[email protected]

Dear Robin,

Verisign has made WLS and re-registration of deleted names a complex issue. Their spin and the complexity they created works to their advantage. This letter answers some questions surrounding this issue and expresses eNom’s support of those in opposition to WLS.

Current situation

All registrars currently register names at the registry on a first-come-first-severed basis. This includes never before registered names, very recently available names and name that were once registered then were deleted and have been available for re-registration for long periods of time. The wait list service, or WLS, is a proposal that will change the way recently available names are re-registered. Currently, each registrar registers these names on a first-come-first-served basis. Without WLS, as soon as the name becomes available, the first registrar that attempts to register the name will actually register it.

Many of the names that will become available are in demand, but are unavailable because they are currently already registered. To service this pent-up demand, registrars employ different models to register the names on behalf of consumers. The following are three examples of currently existing models:

  1. One registrar employs an auction model, whereby the registrar will devote its resources to registering a particular domain to whichever customer pays the most money. If and only if the registrar is successful at registering the name does the registrant pay the registration fee, which in this case is the top auction price.


  2. Another registrar employs a "club" model whereby the registrar will devote its resources to customers who pay a monthly subscription fee ($100 per month) to be in the "club". If and only if the registrar is successful at registering the name does the registrant pay the registration fee, which in this case is $6.95, or $.95 over the registry fee of $6.00


  3. Another model is similar to the WLS model whereby customers "backorder" a name. Once a name is backordered, no other customer can back order it. The fee to backorder a name is $69 per year. There is no additional fee once the name is actually registered. If the name is not registered on behalf of the customer during the year, the customer loses the $69.

Q and A

Q: What is the proposed pricing of the WLS, and will it be more than now?

A: It is proposed that it will cost $24 for a WLS subscription, then an additional $6 to the registrar that purchased the subscription, but only when the name is registered. Additionally, the registrar will likely charge at least $1 for profit, for a total of $31 per name if the name is registered. At least $31 (with WLS) is more than $7-$10 on average (now, without WLS), so yes, it will cost more than now. The proponents of WLS spin the price by saying, "hey, $24 less than the $40 we originally proposed, so its cheaper". For a WLS to be the same price as today, it should cost $0, because 0+6=6, which is today’s price to re-register a deleted name.

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Q: What if the name is not registered?

A: If the name is not registered after a year, the customer loses all their money, or alternatively, they can change the WLS to another name for up to 3 times over the year. If none of those names are registered, the customer definitely lost their money. For example, if a WLS is sold for "yahoo.com", since that name will most likely not be deleted, that person "lost" their money, and the registry gained $24.

Q: Will a WLS be sold for "yahoo.com"

A: Most definitely yes, but not to a person who thinks they will actually one day be the registrant for yahoo.com. It will be sold to someone who wants to extract big money from the current registrant of yahoo.com, because whoever buys it, though knowing that it is likely never to be deleted, but would get it on the off-chance that it was deleted, and therefore could offer the WLS to Yahoo, Inc. at a price greater than $24, and in this case, much greater.

Much like as if the real estate deed to Rockefeller Center in NYC transferred to someone if ever the current owners of Rockefeller Center were late in filing their property tax return, so some other relatively trivial event. The current owners of Rockefeller Center would not want to take such huge risk in losing their property, so they will therefore buy that right from the person for a substantial sum over the $24 the person paid.

How would you feel if you were yahoo.com, or msn.com or apple.com, or aol.com, and some, heaven forbid, pornographer, out there definitely (100% remember?) gets the official rights to your name, if some, albeit low probability, event happened? You’d have to disclose this risk to your shareholders.

There will be many, many companies, you name them, not just yahoo, which will not be at all happy about that situation once they find out about it.

Q: Isn’t WLS much like selling an option, for example, on shares of stock?

A: No. Normally when you sell an option on shares, the shareowner gets the proceeds and has the choice to not sell that option. In this case the registry will get the proceeds and the registrant does not have the choice to not sell the option. The situation is as if the registered names are not the registrant’s, but still the registry’s to do with as it pleases.

Q: Will people be duped to buying a WLS on their own names?

A: Yes. In the currently proposed WLS, you cannot opt-out your name from having a WLS sold on it. Therefore every registrant:

  1. Is opened to the unscrupulous WLS holder saying (though not exactly true, they’ll say it anyway) "I will get your name if it is ever accidentally or maliciously deleted, so pay me $X now"


  2. Will be fooled into "buy the WLS for your name before someone else does"


  3. Or will be fooled into the FUD (fear, uncertainty, and doubt) pitch: "buy the WLS as insurance incase your name is ever accidentally deleted", even though there are a number of measures currently in place to already insure this does not happen, including a) registrar-lock, b) 10-year registration periods, and most importantly, c) the redemption grace period

Q: Will the introduction of WLS limit the choice of consumers?

A: Yes. Currently there are more than four competitive models to re-register recently available names from which consumers can choose. Due to this competition, prices to re-register deleted names have been dropping. If WLS is implemented there will be only one model (WLS) and the single monopoly registry will run it.

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Q: Will implementation of WLS preclude the other registrars from re-registering names that have been deleted?

A: Yes and No. Any name that has a WLS subscription on it will not be available to be re-registered except to the registrar (on behalf of the registrant) that placed the WLS subscription. Other registrars will be able to re-register recently available names that do not have a WLS subscription using the first-come-first-served system in use today. Only names that are worth less than $31 will be able to be re-registered in this manner, since ones that are worth more will already have a WLS on them.

Q: Will WLS reduce the technical load on the registry?

A: No. Since it costs nothing to submit a registration request, registrars will administer as many requests for low-value names as they do today for high-value names.

Q: If WLS is implemented, who makes money?

A: The registry will make $24 on names that are worth more than $31, even if the name is never actually registered. If the name is actually registered, the registry will make $30 on names that are worth more than $31. Currently the registry makes $6 on names, and then, only when they are actually registered. In both cases, and depending on the model, the registrar makes as little as $1, therefore the higher fees come directly from consumers.

Q: So currently, where does the $25 go?

A: In one model, $1 goes to the registrar and the consumer saves $24. In other models currently in use, the registrar makes more, but in most if not all models, the registrant currently saves at least $24 when compared to the future WLS.

Q: Of the registrars that are currently participating in this market, what will happen to them?

A: Many will go out of business. About 15 are being paid by SnapNames to use their registry credentials, and for many of these, the SnapNames revenue is their only income. If WLS is implemented, Snapnames will not need those credentials and therefore those registrars will not receive any more revenue. The registry will make the money that these registrars were making, plus more that is extracted from registrants (consumers) due to the registry’s monopoly position and the resulting higher overall fees paid by the public. The registry will then pay some of this revenue to its SnapName partner. The registry and SnapNames make more money, while the other registrars make zero, and most importantly, the public spends more for the same thing.

Q: Will WLS be a new offering?

A: Not really, SnapNames offers a similar model, albeit with less efficacy (note that its less than 100% efficacy proves that there is existing competition, and that there isn’t already a monopoly currently in place).

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Q: is WLS "better stuff"?

A: No, because:

  1. Once a WLS is taken, no other customer can have the rights to that name if it becomes available.


  2. If a name never becomes available, the consumer (WLS subscriber) will most probably lose their money and end up with no names.


  3. It un-levels the registrar playing field because the registrars who delete the most names (the larger registrars) can offer WLS subscription at lower risk for the names they know they will be deleting. This is a subtle but important point since competition at the registrar level is important to maintain. Larger registrars can say "if you buy a WLS for this particular name from me, I will guarantee that I will delete it, and you will therefore be guaranteed not to lose $24". Other registrars cannot make the same guarantee for the WLS for that name and must then offer the WLS with a higher risk. Since 50% of names are deleted (on average) and become available each year, WLS removes the fair competition that has been painstakingly established for 50% of the registration market. As an added aspect, it may be no coincidence that the registry that wants to implement WLS owns the largest registrar; in who’s favor the competitive landscape will tilt. The current implementation proposal, while it may attempt to, does not eliminate this.

Q: is WLS less expensive?

A: No. Recently deleted names are currently available for $6 from the registry and for as little as $7 to consumers. WLS will increase this to at least $24 (for WLS to registry) + $6 (for registration to registry) + $1 (to registrar) = $31. Just because WLS is priced at $31, which is less than SnapNames retail price of $69 does not mean it is less expensive than what already exists today. It is actually more expensive because it must be compared to the average price of $7-$10 (and closer to $7) that, due to competition in the re-registration market, the price has been driven down to.

Q: Doesn’t WLS provide a better means to distribute re-registered names to consumers?

A: No. The very first minute that WLS goes live, nearly all the WLS subscriptions for valuable names (such as those valued at more than $24) will be taken, and not by the average Joe consumer. The next minute, those registrants will be solicited to buy the WLS on their own names for more than $24. By the time the consumer knows what happened, it will be too late, all the WLS subscriptions for valuable names will be gone and more importantly (and ironically when comparing the current status quo to WLS) any name that does not already have a WLS subscription would have been available for re-registration anyway (and at a lower cost) if WLS was never implemented. At least in the current system, the average Joe consumer has as much chance at re-registering a deleted name as anyone else. With WLS, after the WLS is taken (which will happen very quickly after WLS go-live), Joe consumer has no chance at all.

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Q: Isn’t WLS better than what exists now since the customer will definitely get the name?

A: Not really. It is true that if there is a WLS on a name and if the name becomes available, then the WLS-holder will definitely get the name, but these two "ifs" do not always happen. If the name does not become available, then the customer lost at least $25, whereas now (if the consumer chooses one of the competitive models that is not WLS-like such as SnapNames’ model) if the name does not become available the customer loses nothing. Additionally, if Yahoo, Inc. does not have the WLS on yahoo.com, and someone else does, there is no chance that Yahoo, Inc. will get the name if it ever becomes available, whereas with the current system, there is.

It is true that 100% efficacy is more than 70% efficacy, but in this case, more is not better, since 100% of a bad (more expensive, monopoly, unfair competitive) model is worse than 70% of the same bad thing.

WLS:

  1. Brings a monopoly to 50% of the name registration market, where there isn’t one currently
  2. Increases prices to consumers
  3. Is not better, overall, for consumers, than what is available today
  4. Makes for unfair competition, in favor of larger registrars.
  5. Removes choice by forcing the market to one model instead of the diverse models available today.

Q: If WLS is not a monopoly service, why not let the registry set any price it wishes, and let competition reign?

If it is a monopoly service, why then introduce it, and eliminate the current competitive situation?

A: Because it is a monopoly service. What better mechanism to set the price than true competition?

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Q: Why should my government or another authority choose one model over the others, especially when fair competition is in place now and working to bring choice and drive down prices? Why should it take the risk that WLS will make thousand, if not more, companies very unhappy with the risk in losing their names if someone else gets the WLS?

A: It shouldn’t

WLS is not new stuff, better stuff, or cheaper stuff.
WLS is a gussied-up, higher cost, monopoly service without even much of a disguise to those that follow this complex issue. This registry level service is not more attractive or convenient to consumers, unless you think that a monopoly is more attractive and convenient because there is only one place for consumers to go to pay more.

eNom, one of the top-five largest registrars worldwide, supports Dotster, GoDaddy and the numerous other registrars, resellers, and the general public participants, and others who form a consensus and oppose WLS.

Best regards,
Paul Stahura
CEO, eNom, Inc.

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