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Verisign tries to discredit ICANN commenting period process

Company suggests that drawing attention to comment period distorted the multistakeholder process.

Boy looking surprised with the words "say what??"

The comment period for ICANN’s proposed .com contract amendment with ICANN closed last Friday. The amendment would allow Verisign (NASDAQ: VRSN) to increase prices in the future in 4 out of 6 years.

Among the thousands of comments was one from Verisign itself (pdf). Take a moment to read it.

Verisign’s letter suggests that domain name registrars and investors (or “speculators,” in its words) have “distorted and undermined the multistakeholder process by”…wait for it…

Encouraging people to comment during the comment period.

Some domain name registrars asked their customers to comment on the proposed amendment. Verisign argues that ICANN should discount the comments submitted by these customers. Verisign suggests that the registrars are aligned with domain investors (or speculators, in its words) and didn’t tell their customers the whole story (the way Verisign wants it to be told).

For example, Verisign implies that Namecheap customers are domain investors, so comments from Namecheap customers should be discounted. To make the case that Namecheap customers are investors, Verisign points out that someone registered Covid-19.com at Namecheap, presumably intending to make money from the domain. It also notes that Namecheap lists premium domains on its site. Ergo, Namecheap customers must be domain investors.

Certainly, nudges from Namecheap and other registrars, as well as Internet Commerce Association, had a big impact on the comment period. People and companies submitted nearly 9,000 comments. Most of the people who commented wouldn’t have been aware of the comment period without the registrars notifying them or if the press hadn’t picked up on it.

Verisign wants to make sure that ICANN doesn’t consider each comment a vote, and points to U.S. government guidelines that state that comments to government agencies are not votes, and some carry more weight than others.

That’s undoubtedly true. If comments were considered votes, then .org price caps wouldn’t have been eliminated.

What Namecheap, Internet Commerce Association and several registrars did during the comment period happens all of the time in government. Groups like the American Cancer Society, veterans groups, etc. frequently encourage their supporters to comment to government officials or to comment to agency decision-makers. Otherwise, the decision-makers would never hear from the grassroots. Agencies need to hear from the people affected by policy decisions.

Verisign suggests that commenters on the .com proposal are acting in their self-interest. Of course, people of these groups are commenting in their own self-interest. Whether it’s to get more government funding for medical research or veterans benefits, or to advocate for net neutrality, people rarely submit comments that are against their self-interests.

Verisign is looking out for its own best interests, investors and domain registrants for theirs. Individual domain registrants who found out about the comment period from their registrars or media are also commenting in their interests. I doubt that many registrants would comment in favor of paying more money in the future. Just like Verisign wouldn’t comment that it thinks prices should be limited.

I’m a businessperson and a capitalist. I realize that Verisign has one job: maintain its control of .com and extract as much revenue as it can from it. That’s management’s duty and that’s what its shareholders want.

It’s the way it goes about it that draws the ire of industry watchers and shows just how strange the market dynamic of having a no-bid, presumptive renewal contract is.

I had a discussion about Verisign with someone (who was not a domain investor) last year. When I pointed out that Verisign has to work on behalf of its shareholders, he said (and I’ll paraphrase), “Yeah, but they don’t have to be such [jerks] about it.”

Or, as Kevin Murphy wrote, “The chutzpah on this company is sometimes jaw-dropping.”

Verisign has certainly been disingenuous in suddenly saying that domain investors are bad. It created products and tools for domain investors, and wined and dined them to try to get them to buy more domain names. This was especially the case in recent years when Verisign wasn’t able to increase .com prices. The only way it could keep its revenue numbers marching upward was to sell more domains. Natural demand wasn’t enough; it needed domain investors to register domains.

Now that price hikes are on the table, the company has done an about-face.

Verisign realizes that domain investors are easy to pick on. Nobody really likes domain investors. And while Verisign attacks investors, investors are busy singing the praises of .com.

By implying that most commenters are investors, Verisign is trying to discredit all comments.

In most industries, customers who were treated like this by their supplier would find another supplier. But Verisign is the only supplier of .com domain names.

Verisign has played the long game to maximize revenue from its control of .com. It created Site Finder and then got the better hand over ICANN in settling the ensuing lawsuit.

Vint Cerf was Chairman of the Board of ICANN during that fiasco. In 2006, he told the crowd at Domain Roundtable that he saw the resolution as the best possible outcome at the time. The outcome was that Verisign received the .com contract in perpetuity.

That was a huge win for Verisign, but Verisign got perhaps an even bigger win at the end of 2018. That’s when the U.S. government amended its Cooperative Agreement with Verisign. It would allow, assuming ICANN agrees, for Verisign to increase .com prices 7% in the last four years of each six-year contract. While that’s a win for Verisign over the remainder of the current contract period, the biggest win is that Verisign gets this right in perpetuity. The agreement can only be modified by mutual agreement of the U.S. government and Verisign. So future administrations can’t remove the price hikes–only ICANN can. The amendment was worth billions of dollars to Verisign.

Oh, and it also hired the former counsel for the Internet Commerce Association to help it make arguments against domain investors and price controls.

You have to hand it to Verisign. It has played its cards well.

But apparently, this isn’t enough. The day after it got that multi-billion-dollar gift from the U.S. government (again, assuming ICANN agrees to it), it wrote an inflammatory blog post about domain investors. This suggests that either Verisign doesn’t want to settle for 7% price increases or it’s just really vindictive.

Here’s how I think this will play out: despite overwhelming opposition to price hikes, ICANN will go forward with its amendment. It will say it’s no longer a price regulator and is just deferring to the U.S. government on pricing.

Verisign will increases prices. Domain investors and registrants will grumble. Verisign will push the levers as far as it can, perhaps asking the U.S. government to remove price caps altogether.

At some point, though, the company will become so insanely profitable that more people will take a look. They might even nudge antitrust forces.

Or maybe a big company with thin margins will buy Verisign and neatly tuck the costs into its overhead, hiding this money-printing press inside its books.

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