ICANN Participants Spar Over Vertical Integration as ‘Bonnie and Clyde’
What’s the harm in letting registries of new generic top-level domains (gTLDs) operate as registrars that market and sell names, including their own? That was the subject of a heated debate during an ICANN consultation in Washington last week, and participants seemed nowhere near the compromise that ICANN Senior Vice President of Services Kurt Pritz said was possible. There are “many shades of solutions” for so-called vertical integration, he said: “We still want to listen and we still want to exhaust the possibilities for discussion on compromise,” such as “hybrid models.” NetChoice Executive Director Steve DelBianco said the fear was that integrated providers would act anticompetitively, the domain-name version of “Bonnie and Clyde."
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It’s not clear whether ICANN is considering integration through the “policy development process” or as an implementation issue -- essentially off the table for argument, said Becky Burr of Wilmer Hale, a former NTIA official. Margie Milam, ICANN senior policy counselor, said it doesn’t appear that existing registry contracts let ICANN handle integration within the “picket fence” of issues that registries have pre-agreed to abide by, so long as decisions are made through “consensus policy."
The “bad behavior” possible under vertical integration is “warehousing” names and engaging in domain-name speculation, DelBianco said: Maybe registries and registrars should have to “sleep in separate beds.” ICANN General Counsel John Jeffrey said DelBianco was “constructing backwards,” inferring bad behavior from a particular arrangement that hadn’t been shown yet. “The easy answer is I don’t know [what issues could arise], and that’s probably the right answer,” he said. That’s like saying “marriage leads to a bank robbery,” said Dan Hallorman, ICANN deputy general counsel, referring to the Bonnie-and-Clyde metaphor.
It’s clear that ICANN staff anticipate “pernicious behavior” under integration, said Brian Cute, vice president for discovery services at .info registry Afilias. The only question is whether bad acts under integration can be handled under the picket-fence process, he said. Jeff Neuman, vice president of law and policy at .biz registry NeuStar, said ICANN staff seem to be saying that integration should go forward and be analyzed for harm two years later -- long after new registries have become established and contractually shielded from any action ICANN might take against them. “The problem is going to be that much more exacerbated,” he said. Milam said ICANN staff had only suggested a delay to see whether it can deal with any bad behavior under the picket-fence process. Neuman said participants should focus on where there’s full agreement -- letting registries act as registrars for domains other than their own, and allowing “single-registrant” TLDs, such as .ibm for IBM’s internal use.
If the concern is that vertical integration will lead to jacked-up prices for domain registrants, there’s already evidence to the contrary in country-code TLD pricing, which varies widely, said Antony Van Couvering, CEO of registry services consulting firm Minds + Machines. “I'm sensing a dislike of actual data, because there’s plenty of it” to suggest integration won’t be inherently harmful. Neuman said the logical step would be to simply eliminate registrars altogether. “We should not take the halfway step” of letting registries sell their own names without restrictions.
The real harm is preventing the distribution essential to new gTLDs by blocking vertical integration, said Richard Tindal, senior vice president at Demand Media, owner of the eNom registrar. Some new domains won’t be able to find registrars to market and sell them if their registry can’t sell them, he said. Participants should further consider when competitive concerns come into play under a given registry structure, without getting into “excessive categorization of different TLDs” -- setting different conditions based on the kind of gTLD, Cute said.
Former ICANN board member Michael Palage said ICANN should consult with its Governmental Advisory Committee on integration. “They've surely been briefed on this issue more than once,” given ICANN’s lengthy discussions with the committee on the gTLD expansion, Pritz said. DelBianco said there was a “huge risk” that public expectations for new gTLDs wouldn’t be met under integration. If a .shoes domain is created, for example, an integrated operator surely wouldn’t price women.shoes the same as other second-level names -- it could likely fetch $1 million, he said. Or the operator could sell women.shoes to an affiliated registrar so it “stays in the family,” DelBianco said: The danger is “all about speculation” in the domain-name market. Consultant Marilyn Cade said she sensed a “significant shift” in how gTLDs were being pitched -- from registries providing a public service, to simply another money-making opportunity.