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Verisign's Anticompetitive Waiting List Service

Verisign and SnapNames are attempting to monopolize the currently competitive secondary market for internet domain name registration. It appears they have managed to confuse the media and their government representatives with inaccurate and misleading information, thereby effectively clouding the issues. The facts contained in this document expose the truth on the proposed domain name wait list system, known as the WLS. Please see the bottom of this document for people you can contact now to protect your rights as a domain consumer.

Background:
While trying to open up the domain registration market to competitors in 1999, the US Department of Commerce ("Commerce") agreed to let the Verisign Registry mandate a $6 per year registration fee from their new competitors in order to keep the universal COM/NET/ORG domain database organized. Commerce further tried to separate the NSI/Verisign Registrar, which serves end-consumers, from its Registry, which serves the new competitors (as well as Verisign’s own Registrar).

The back-end Registry is still and has always been a 100 percent monopoly of NSI/Verisign, with the government’s blessing. Few domain registration companies like the situation, but they have no choice other than to pay their competitor (Verisign) $6 per year for every registration and renewal their own customers make.

Verisign’s current modus operandi is to buy up and partner with bigger competitors and squeeze the rest out of existence by exerting monopoly control (causing higher fees and making competitor services irrelevant, etc.). Few registrants use Verisign because of good prices or service. Most registrants registered their domains when NSI had its registration monopoly and Verisign makes it as difficult as possible to transfer domain names to competitive registrars. Hence, NSI/Verisign still controls a huge part of this retail market too. As mentioned above, Verisign controls 100% of the Registry and gets $6 per year for every name registered by the customer of any registrar - even all the people that proactively have transferred away from their retail service. The supposed split between the Verisign Registry and Registrar is fiction. The same shareholders and management run both. For example, Chuck Gomes (Vice President, Policy & Compliance) who has been with NSI since the early 1990s, has undertaken substantial efforts to keep the monopoly strong, while purporting to represent the best interests of other registrars in the WLS process.

The WLS:
The Waiting List Service (WLS) is a scheme unilaterally proposed by Verisign in order to enable it to receive $20-$30 per WLS subscription (which may or may not ever enable the subscriber the ability to acquire the domain name), instead of a maximum of $6 for an "actual" domain registration, pursuant to the Commerce approved contract. This fee merely places a prospective registrant on a completely useless waiting list (see below) and does not even include the domain name registration fee.

The biggest scam is that the WLS is somehow supposed to help consumers but, in actuality, it would simply create yet another huge inefficient layer of expense and bureaucracy for the entire domain industry at the expense of domain consumers. Simple economics tells the story. Economically incentivized domain registrants, working with surviving competing registrars, or Verisign themselves, will be motivated to register roughly the same domain names through the WLS process as they would without it. But they will all have to pay off the Verisign monopoly exorbitant sums in the process (more than the $6 per domain they are currently forced to pay) - all of these costs will be directly incurred by or passed on to consumers. This will squeeze additional funds from the consumers and all non-Verisign domain registrars and dealers simultaneously. This entire scheme has been devised only for the enrichment of one enormous, monopolistic, politically-connected, Wall Street mega-corporation.

If the domain market cannot absorb these excess fees, fewer overall names will be registered, thereby harming the entire economy to a degree. These increased expenses for the domain registrars and their customers will result in many currently healthy small companies failing. Such is the fate of monopolized markets.

The existing lack of the "Chinese wall" between the Verisign Registry and Registrar, as contemplated in Commerce agreements, is already alarming and hurtful to supposed competitors, and certainly the WLS would bring about massive additional conflict and harm.

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Monopolies vs. Competitive Markets:
Verisign is a public company whose monopolistic practices have proven to fail the market since the beginning of the modern Internet (under the name Network Solutions). Most related to the Internet industry know of their service and pricing failures. Economics101 makes very clear that monopolies are bad (and illegal) - in practice Verisign/NSI has proven the same. The existing Registry monopoly and proposed WLS monopoly, like all other monopolies, leave consumers with fewer choices, higher costs, and poorer service.

Ever since the secondary domain market began to take root two years ago, NSI, whose monopoly was supposed to be regulated and controlled, has tried to close the door on competition like they have in other market segments. Waste, inefficiency, bureaucracy and illegitimacy are overthrowing free markets and relatively efficient capitalism. Didn’t we learn enough from watching how companies like Enron, WorldCom, and Adelphia manipulate markets and government processes to obtain enormous wealth? With the WLS we have a chance to stop another injustice that has yet to come to fruition.

In fact, the Verisign Registrar has been losing enormous numbers of customers and market share ever since 1999 when the registration marketplace opened up. This is clearly because customers, frustrated with the high prices and poor services from the 100% monopoly days, turned to competitors, who were cheaper, more responsive and often bundle added services with each registration. It makes no sense to unwind the progress achieved so far by permitting Verisign to extend its monopoly status, which will, no doubt, result in harm to consumers. The only purpose of the WLS is to line the pockets of Verisign and SnapNames, who will be free from all competition in the secondary market for domain names. They will be able to control what happens to every expired domain name - despite the fact that they have no way of legally establishing any rights to those names.

The only place competition in the domain space has worked and proven profitable to competitors is in the secondary market, which includes the deleted-domains market space. This piece of the market feeds about a hundred small companies and their employees. The most innovative ones get fed the most leading to lower prices and higher quality services for consumers – and leading to loss of money and monopoly power to Verisign. Conversely, enacting the WLS will immediately raise business costs to all small Verisign Registrar competitors (who are also customers of the Registry) forcing many of them to fail and the others to defray their increased costs by raising prices to consumers or cutting services. This is by design of Verisign in its attempt to monopolize the secondary domain market, and put it competitors out of business through unfair means, while manipulating ICANN board members and politicians in their districts.

The Government:
The US government should have had more common sense than to let the WLS get to this point, knowing how much work Commerce had done in its attempt to break NSI’s stranglehold in 1999. Government agreements, rules and antitrust laws, that apply to this market, have been and are being blatantly violated by Verisign at the expense of consumers. In fact, the secondary market for generic domains (like democratic.org or fairtrade.com) is one of the few bright spots in the tech or domain industry where innovation has lead to profits and job growth for dozens of very hard working, law abiding small companies (the very backbone of America). Handing the rest of the domain market on a silver platter to a well established monopolist is bad form at best and probably will prove illegal in many respects.

SnapNames:
Verisign’s new best friends, SnapNames, who they befriended for political purposes in the process, will also hit the WLS jackpot. SnapNames was adopted as a WLS partner, in order to push the WLS through the system by misleading congress and the public about the domain markets. The befriending of SnapNames is all done under the guise of Verisign "licensing SnapName’s critical technology" (Everyone in the industry knows their technology is useless if domains are no longer being deleted as contemplated under the WLS proposal.) Ironically, SnapNames was happy to badmouth domain dealers in a congressional hearing on the subject, even though we believe about 90% of their revenue has been derived from those sources. If they are in bed with a monopoly who needs arms length customer relationships anyhow? SnapNames was overwhelmingly motivated by the greed at having Verisign give them the slice of their new secondary market monopoly. If Verisign had not included SnapNames in its proposal, SnapNames would surely have been its biggest critic since its entire service of reserving domains in advance of deletion would be rendered obsolete by the proposed WLS system, and the company would fail– i.e., if domains (that nobody legally owns) are no longer deleted then people no longer need to pay to reserve them at SnapNames. Services provided by SnapNames’s competitors, such as those offered by NameWinner, eNom, NicGenie, and IARegistry, would fail if the WLS comes to pass since those companies aren’t in on the scam with Verisign. Some of these companies would still have other viable services and some not. Plus, hundreds of other companies, that indirectly compete in the market by offering registration services and domain resale, and many millions of domain consumers and their small businesses, would all suffer irreparable harm.

This is simply a case of two companies, with mischievous intent, colluding to take 100 percent control of a currently competitive market space. There is one large company with a monopolistic past and one pawn to pretend the public supports the move. The only other ICANN-accredited registrars who voted in favor of the WLS were either owned or closely connected to these two companies. But the wishes of the ICANN Registrar’s Constituency was thrown out the window when the ICANN board (including a SnapName board member) caused the board vote in favor of the WLS – ironically, only weeks after ICANN publicly stated they could not handle their mission. www.icann.org/general/lynn-reform-proposal-24feb02.htm

Verisign has signed on SnapNames so that is the biggest proponent of the service, instead of being its biggest opponent which it would otherwise be. Small registrars are not nearly as vocal or powerful, so many will just get steamrolled out of business. With the new system these other registrars who specialize in the secondary market would have little value-add to offer their clients. There is no reason to use them on the WLS since they couldn't distinguish themselves. They also would have little use for the equipment, employees, and other resources they currently utilize in the secondary market. All of their recent investment in building this area of their businesses could become worthless overnight if Verisign is handed the rights to every expiring domain.

We can’t blame a small company like SnapNames for their willingness to make untold millions of dollars with the help of their mega corporate co-conspirator (other than the fact that their greed extends to blatantly misleading Congress). RealAudio link to the hearings- http://www.fednet.net/ram/2002/sco061202.ram

You can also thank Senator Warner, who doesn’t know (or seem to care to know) anything about domain names but merely wants to cater to the wishes of his constituents, for allowing only pro-WLSers at the Congressional hearing.

As you can now see, Verisign and Snap are purposely overcomplicating and/or falsifying the WLS issues in order to cloud the facts from the public and the government. Are we going to allow this fraud to be committed against us by a huge monopoly and their political connections or will we stand for consumers, small companies, free markets, and open democratic processes?
www.identities.com/vanity/unreality.htm.

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Current Process vs. Proposed WLS Process:
Right now a person "invents" and registers a domain and must pay a yearly fee to a registrar (that registrar is supposed to have the right to compete). The registrar then has to pay their competitor (the registry Verisign monopoly) $6 per year as agreed to by ICANN and Commerce. This alone would be fair if there was not a monopoly on the back end Registry. Each registrar does in fact get to play in this scenario. Now if the registrant chooses not to renew their domain after it expires the name ceases to exist by default, since it’s not legal if unpaid. THERE IS NO SCENARIO WHEREIN THE GOVERNMENT EVER CONTEMPLATED VERISIGN OWNING OR CONTROLLING THIS DOMAIN REGISTERED BY A COMMON CONSUMER, ONCE EXPIRED, AS THE WLS ATTEMPTS.

Once it ceases to exist, according to the years long practice of being deleted, it is then available to be "re-invented" and re-registered. Any registrar is supposed to have the right to register any domain that is not currently owned by someone else including all the ones that once existed. There is absolutely no excuse for the name to revert to Verisign for them to resell to the market at massively inflated rates - and obviously it breaches current government agreements for it to be over $6 in any case.

The current drop system is very fair. Every ICANN registrar gets the exact same number of connections and has an equal chance of getting a name for any of their customers who request the purchase. There are ample resources, funds, and profits at Verisign to support the existing structure. As proposed, the current systems will still exist in parallel with the WLS, and the vast majority of names would be purchased at the former since they are less expensive. In justifying the WLS, Verisign has claimed they seek to cut the costs of the Registry systems. Are they now saying running two systems in parallel will be less expensive than one? If it is less expensive then why an increase in prices?

They already appear inept at running the current system even with about $180 Million a year in Registry revenue, most of which is likely profits. Should they now get to steal another market without the explicit approval of the Commerce Department, who originally only authorized a $6 fee and thereby attempted to control the monopoly? Did Verisign offer to let another company control the WLS in the name of the "fairness" they pretend to be concerned with?

Also the Verisign Registrar is the current registrar of record for the vast majority of names being deleted due to the 20 Million plus legacy domains inherited from their former NSI monopoly. They control and are the only ones who know when these 20 million domains are going to be deleted (if ever) and therefore have an unfair advantage in selling WLS subscriptions via their Registrar (the other side of their hollow Chinese wall).

Currently, hundreds of thousands of expired domains are many months and even years beyond their expiration dates by Verisign, some possibly in an attempt to prime the WLS pump with inventory, or merely to make competitors suffer by withholding domains that could otherwise be registered for their own customers.

Illegally Selling Options Contracts:
Also disturbing is that the WLS ultimately proposes selling an option on someone else’s property (i.e. domain names) – there is oftentimes no service even performed if its owner renews the domain name. I imagine Verisign will get sued by many companies who didn’t appreciate their property being auctioned off while they were still a domain customer in paid status and in good standing, especially considering the pitiful state of Verisign’s domain records which cause thousands of paid-for domains to be mistakenly unregistered or deleted every month. All the while Verisign proposes to take money on any given domain three or more times plus all the yearly renewals – once from the current registrant (about $70 if its their customer and about $12 if its their competitors customer) and a second payment of $20-$30 from whoever gets on the "waiting list" through their registrar of choice. And actually a third time if the target domain is deleted via the WLS process and turns in to a new registration That would be yet another $6-12 for their Registry and another $35-70 if it’s the Verisign Registar’s customer. Then the cycle can repeat itself endlessly if someone else places a WLS subscription.

ICANN:
The ICANN process itself is rife with conflicts of interest. In the WLS process the voting members have abdicated their responsibility to protect consumers and Verisign competitors. The concept of a fair process went down the tubes with the aggressive flow of Verisign money and power, the collapse of ICANN itself, and the inability for the small competitors to afford millions of dollars of legal counsel, PR, and expensive coalition relationships. Not to mention the employees of these small companies have to work hard at their core business every day just to hope to survive – leaving little time for lawyers and rubbing elbows with politicians, which seems to be required to get anything accomplished in the domain space – rules, laws, and agreements are being set aside in order for the powerful to get their wishes.

ICANN is in collusion on the issue as well because they folded at the pressure of their main financial benefactor (Verisign) weeks after having publicly declared they did not have the resources to fulfill their mandate.
http://www.icann.org/general/lynn-reform-proposal-24feb02.htm

The Registrars Constituency, that everyone thought had huge weight on this matter, was totally ignored. More than a 2/3 majority voted against the WLS yet the ICANN board was able to ignore this fact. Moreover the few registrars who voted for the WLS could almost all be linked as business partners of (or 100% owned by) Verisign and SnapNames. And the details of Verisign/Snap relationships with the other people who voted on the ICANN panel are not known and have never been clearly documented.

We firmly believe that the government, ICANN, competitors, and consumers must be assertive in preventing this illegitimate service from ever reaching market before further harm is done to domain consumers.

Sincerely,
Michael Mann
President, BuyDomains.com

To receive more infomation, to provide information, or if you believe your company is being harmed and you want to join a class action suit on the matter contact:
[email protected]

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Here are the people you should contact now in order to help protect you, the domain consumer, from illegitimate monopolistic practices:

1. NTIA
Office of Policy Analysis and Development
U.S. Department of Commerce, Room 4725
Washington, D.C. 20230
Phone: (202) 482-1880
Assistant Secretary - Nancy Victory
(202) 482-1840
Email: [email protected]
Associate Administrator - Bernadette McGuire-Rivera
(202) 482-5802
Email: [email protected]

These guys are the department within the Department of Commerce that is supposed to handle the day to day dealings regarding ICANN and domain names. Are they protecting you or letting Verisign do as it pleases?

2. Department of Justice, Antitrust Division
Mr. James Tierney
[email protected]
600 E Street NW
Washington, DC 20530

This division is in charged of preventing monopolistic activity, such as the WLS. Also, the DOJ enforces contracts with the Department of Commerce. To date, their position on the WLS has not been made public.

3. Write to Your Congressional Representatives: http://www.house.gov/writerep/

They should be protecting you from huge corporations like Worldcom, Enron, and Verisign taking away your money, and your rights to competitive services and prices.

4. ICANN
Internet Corporation for Assigned Names and Numbers
Stuart Lynn, CEO, email [email protected]
4676 Admiralty Way, Suite 330
Marina del Rey, CA 90292-6601
Phone: 310-823-9358
Fax: 310-823-8649
General Email: [email protected]

They were first against the WLS and later caved. Ask why? It may be because because ICANN threw in the towel on their mission and happens to take most of their funding from Verisign. They should have killed this scam long before the government needed to step in.

5. The House Committee on Energy and Commerce
Chairman Billy Tauzin, 202-225-4031
http://energycommerce.house.gov
http://www.house.gov/tauzin/
2183 Rayburn House Office Building
Washington, DC 20515

Mr. Tauzin has been involved in Internet policy and needs to understand and act on this issue.

6. US Department of Commerce

It is Verisign/ICANN contracts with the Commerce Department that are being directly violated in attempting to enact the WLS. Is anyone there taking appropriate action before consumers are harmed more?

Secretary Donald L. Evans
Office of the Secretary
Room 5516
U.S. Department of Commerce
14th & Constitution Ave. NW
Washington, DC 20230
Phone: 202-482-2000
Email: [email protected]

Deputy Secretary - Samuel W. Bodman
Office of the Deputy Secretary
Room 5838
U.S. Department of Commerce
14th & Constitution Ave. NW
Washington, DC 20230
Phone: 202-482-2000

7. Federal Trade Commission
Office of Policy and Evaluation
Bureau of Competition
Washington, D.C. 20580
(202) 382-4357
[email protected]

These guys are slated with protecting consumers, including preventing monopolistic practices. They seek public input so please email them at [email protected] if you think you are being harmed by the WLS.

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SOURCE MATERIAL

Dotster's response to WLS
/domainnews/dotsterWLS07.10.02.html

WLS comments from Identities.com
http://www.identities.com/vanity/WLSCAM.htm

NSI/Verisign's WLS proposal
http://www.verisign-grs.com/wls_revised_proposal.pdf

Link to DOC Technical Management of Internet Names and Addresses
http://www.ntia.doc.gov/ntiahome/domainname/domainname130.htm

Management of Internet Names and Addresses statement of policy, 6/5/98
http://www.ntia.doc.gov/ntiahome/domainname/6_5_98dns.htm

Cooperative Agreement Between the Department of Commerce and VeriSign (Network Solutions)
http://www.ntia.doc.gov/ntiahome/domainname/nsi.htm

Comments by Kirikios
http://www.intangibles.com

Approved Agreements among ICANN, the U.S. Department of Commerce, and Network Solutions, Inc.
http://www.icann.org/nsi/nsi-agreements.htm

Fact Sheet on Tentative Agreements among ICANN, the U.S. Department of Commerce, and Network Solutions, Inc.
(Posted September 28, 1999)
http://www.icann.org/nsi/factsheet.html

FTC Antitrust Guide
http://www.ftc.gov/bc/compguide/antitrst.htm

FTC Illegal Business Practices
http://www.ftc.gov/bc/compguide/illegal.htm

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