Subject: GA-DIGEST V1 #301
From: [email-masked] (GA-DIGEST)
To: [email-masked]

GA-DIGEST           Thursday, March 22 2001           Volume 01 : Number 301

----------------------------------------------------------------------

Date: Thu, 22 Mar 2001 12:58:33 +0100
From: Jefsey Morfin <[email-masked]>
Subject: Re: [ga] ICANN-site FAQ on the existing Verisign agreement

Dear Joop,
You are right. And I do not see any real difference between
both plans IRT most of the legal tricks which may be plaid.

On 10:32 22/03/01, Joop Teernstra said:
>Perhaps you may have seen how ICANN is helpful in providing answers to
>FAQ's re the status-quo agreement with NSI.
>http://www.icann.org/melbourne/info-verisign-revisions.htm
>
>It amazes me how many loopholes the staff have now identified in the
>existing agreement.
>
>Clearly someone may have indicated to ICANN that  when it comes again to a
>court challenge, it may be better off with Plan B.
>
>I am not so sure. The spirit of the agreement to separate registry and
>registrar business should be enforceable, even if the agreement is not
>watertight.

The more I consider the issue, the more I see that THE loophole
is the iCANN itself which wants to enforce a legacy registry model.

Whatever the Plan we are all supposed to agree that competition is
about reducing the VeriSign influence. As long as VeriSign manages
".com" the way it is, this is not feasible. So the alternative is simple:

- - either the legacy model is the target and VeriSign as the leading
   registry is the business leader/monopoly for ever
- - or the current legacy model is [partly] abandonned for a "million
   TLD" type model (cf. BoD at GAC meeting) and new leaders in new
   forms of TLD will appear. We will probably not have competition
   between TLDs as foreseen by the iCANN but competition between
   TLD models.

Let assume that the Plan B is retained. Then ".org" is to be managed
by a non-profit organization. I propose in the best interest of the small
and individual DN holders to create an org owners associative action,
using Marc's site as a start  ( http://disgrace.org/)  and to apply for the
management of ".org".  This way IDNHolders would own their own TLD
as do the Members of he CINICS in the inclusive root.

May be a crusade you and many other would like to join?
For the time being I think Marc's action is to be supported.

Jefsey

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Date: Fri, 23 Mar 2001 00:30:35 +1200
From: DPF <[email-masked]>
Subject: Re: [ga] Option A -- "Divestiture'

On Wed, 21 Mar 2001 20:58:09 -0800, Bret Fausett wrote:

>ICANN posted four additional FAQs this evening focusing on what Verisign
>must do to obtain the four-year extension under the original agreement and
>what limitations, if any, might be placed on Verisign or the purchaser of
>the registrar assets after any sale.

I am absolutely stunned by the litany of opinions posing as facts in
these FAQs.Perhaps it is a cultural thing but I am amazed that staff
who one expects to provide a neutral source of advice are acting as
partisan cheerleaders for these proposals and using their ability to
access the ICANN website to put forward what are essentially their
private opinions purporting to be facts.

In any company I know of, staff who behave in that way would have been
sacked.  I do not say this lightly but such behaviour as I have
witnessed is alien to me from professional staff.

DPF
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Date: Thu, 22 Mar 2001 08:38:05 -0500
From: "Gomes, Chuck" <[email-masked]>
Subject: RE: [ga] note on timing

I'd like to recommend that any report include as much objective data as
possible.  That will assist the NC in assessing the degree to which
consensus was obtained in the GA.  In particular, I believe that the report
should contain the following:
	- Number of registered participants on the GA list
	- Number and percentage of participants in the discussion
	- Specific data regarding results of any votes or polls taken
	- Any data available regarding the representativeness of the
recommendation(s) made
	- Brief summaries of the major arguments, pro and con
	- Timeframe during which the discussion took place
	- Brief description of methods used to discuss the issues and
evaluate consensus.

I suspect that some will suspect my motives in the above but let me say that
one of the things some of us in the DNSO have been trying to do within the
NC budget committee is to work towards significant improvements in the
consensus building process.  It is widely accepted that past DNSO efforts to
manage the consensus process have been very ineffective.  I believe that
some of the main reasons for this are as follows:
	- There has been much too much subjectivity.
	- Little or no guidance was given to working groups, constituencies
and the GA in terms of what results were expected.
	- There has been very little effort put into developing and then
implementing processes and procedures that would serve as guidelines in the
consensus building efforts.

There is no doubt that building consensus around issues in a global and very
diverse setting is extremely complex so efforts to accomplish what I am
suggesting will take a lot of time and work.  But I am still optimistic
(maybe naively) that there is hope.

In the meantime, the GA has an opportunity in the process currently going on
to demonstrate some useful approaches to the NC and the DNSO as a whole.
And I complement those who have been participating in the recent list
dialog.  In my opinion, there has been a very useful exchange of opinions,
facts, questions and analysis. 

Chuck

- -----Original Message-----
From: Jonathan Weinberg [mailto:[email-masked]]
Sent: Wednesday, March 21, 2001 9:25 PM
To: [email-masked]
Subject: [ga] note on timing

	The Names Council has scheduled a meeting for Wednesday, March 28 to

discuss the proposed Verisign agreement, and to agree on a statement 
regarding the agreement, to be forwarded to the Board, on behalf of the 
DNSO.  Philip Sheppard, as NC Chair, has asked the GA and each of the 
constituencies to report their views to the NC by noon ***this 
Sunday***.  He asks:  "Please keep reports short, listed in note form and 
focused on the desirability of the status quo (old agreement) and the new 
agreement. What are the pros and cons ? Which agreement do you 
prefer?"  Sheppard will use the following three days to generate a 
consolidated statement that the NC and GA Chair can approve on Wednesday.

	This doesn't give us much time -- to be precise, we've got about
three 
days left.  Under the circumstances, I think we have two tasks:  First, we 
need a single document summarizing the points that appear to have general 
(although not universal) support on the list.  I think Roberto is working 
on such a document; David and anyone else who has text to offer should get 
it to him.  Second, once the document is distributed, folks need to give 
Roberto enough feedback so that he can make a decision by Sunday whether to 
pass it on to the NC.

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Date: Thu, 22 Mar 2001 08:35:34 -0600
From: Dave Crocker <[email-masked]>
Subject: Re: [ga] Option A -- "Divestiture'

At 06:30 AM 3/22/2001, DPF wrote:
>I am absolutely stunned by the litany of opinions posing as facts in
>these FAQs.
>...
>In any company I know of, staff who behave in that way would have been
>sacked.

Perhaps the irony of your note escaped you, but you offer only your summary 
opinion and no facts at all to substantiate them.

Whatever your extensive experience with proper staff functions, the 
analysis provided by ICANN staff is actually quite professional.  It labels 
opinions as opinions.  It analyses contract language and describes specific 
obligations and lack of obligations, in terms of common expectation about 
Verisign.

Staff are not expected to be machines; professional analysis had better 
include professional opinions.

d/

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Dave Crocker   <mailto:[email-masked]>
Brandenburg InternetWorking   <http://www.brandenburg.com>
tel: +1.408.246.8253;   fax: +1.408.273.6464

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------------------------------

Date: Thu, 22 Mar 2001 08:16:22 -0600
From: Dave Crocker <[email-masked]>
Subject: Re: [ga] ICANN-site FAQ on the existing Verisign agreement

At 03:32 AM 3/22/2001, Joop Teernstra wrote:
>The spirit of the agreement to separate registry and
>registrar business should be enforceable, even if the agreement is not
>watertight.

a contract is a contract.  its authority is its wording.  intent is not 
irrelevant, but it largely secondary.

that's why it is important to look at the existing contract and the 
proposed alternative in their entirety and compare them in terms of 
trade-offs, rather than in terms of individual points within them.

d/

- ----------
Dave Crocker   <mailto:[email-masked]>
Brandenburg InternetWorking   <http://www.brandenburg.com>
tel: +1.408.246.8253;   fax: +1.408.273.6464

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Date: Thu, 22 Mar 2001 09:59:26 -0500
From: "Gomes, Chuck" <[email-masked]>
Subject: RE: $200 million (was [ga] Draft Resolution)

Chris,

Yes, it is VeriSign investing in it's systems but improvement in those
systems benefit the entire community, especially with regard to the .com,
.net and .org registries, but also potentially for other registries if they
at some time in the future arrange to use some of the infrastructure put in
place.  This could include ccTLD and gTLD registries.  It could include the
.web registry in the future if and when it is added.  And it certainly
includes all the registrars and associated registrants who use those TLDs.

I know it is not popular to admit the fact that VeriSign (and NSI
previously) has made investments that have benefited the Internet, but it's
a fact.  There is very little worry today by Internet users of .com, .net
and .org domain names with regard to resolution in the gTLD zone servers.
Millions of people take advantage of systems that we have put in place
without even realizing it.  We have operated the a-root-server and the
j-root-server for many years as a contribution to the community.  Like the
gTLD servers, people take for granted that they function reliably.

What we are committing to if the new agreements are executed is
significantly more investment.  That investment will certainly benefit us
but at the same time it will benefit the Internet as a whole.  

Chuck

- -----Original Message-----
From: Christopher Ambler [mailto:[email-masked]]
Sent: Wednesday, March 21, 2001 6:22 PM
To: [email-masked]
Subject: Re: $200 million (was [ga] Draft Resolution)

> It is my understanding that VeriSign would control the spending of the
> funds.  I am not aware of any companies that would commit to spending of
> $200M and let everyone in the world decide how it would be spent.

Chuck, correct me if I'm wrong, but isn't this just Verisign saying, "give
us
what we want in the contract, and we'll spend $200 million on our own
systems?"

Verisign's purchases go towards capital equity, since they own the
equipment,
and while you could argue that the Internet as a whole may benefit from the
investment, it's still merely Verisign spending its own money on its own
systems.

Or am I missing something?

This will be my only post today, so I grant my other 4 posts to Chuck, so
he can answer this one.

Christopher

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Date: Thu, 22 Mar 2001 10:35:49 -0500
From: Jonathan Weinberg <[email-masked]>
Subject: Re: [ga] Option A -- "Divestiture'

         Bret’s point (unsurprisingly) is worth careful attention.  The FAQ 
materials shed new light on the issue raised by James Seng in his post a 
few days ago:  Materials circulated by Verisign’s investment bankers seem 
to take for granted that if Verisign does divest the registrar, it will 
nonetheless continue as a *reseller* of domain names. It seems to me that 
this new operation would likely differ from Verisign’s existing registrar 
business in at least three ways.  First, Verisign would have to give up the 
Network Solutions name and trademarks to the acquirer, since the existing 
contract requires Verisign to “divest[] all the assets” of the registrar 
business to the acquirer, and the Network Solutions name and trademarks are 
part of those assets.  So the new Verisign reseller operation would need a 
new name.  Second, the NSI Registrar employees, servers, intellectual 
property, and so on would also be going to the acquirer – those, too, are 
part of the “assets” that must be divested.  So Verisign’s reseller 
business would have to be a new business, not just NSI Registrar under a 
different name.  Third, the Verisign reseller, having taken a registration 
from a member of the public, couldn’t simply enter the name in the SRS, but 
would have to buy that service from some accredited registrar.

         Though James’s message can be read to suggest otherwise, I think 
it’s *not* likely that any divestiture could require the acquiring 
registrar to take registrations only from Verisign and nobody else.  That 
would tie the companies together so closely as to raise the persuasive 
argument that the divestiture was a sham, and would, I think, violate the 
contractual language forbidding any arrangement under which Verisign would 
be able, “directly or indirectly, to direct . . . the operations or 
policies” of the new registrar.  Nor does it make a lot of sense to me that 
Verisign would want to include such a restriction, which would reduce its 
sale price with no corresponding benefit.

         What should we think about such a result?  It would eliminate any 
existing incentive for Verisign Registry to bend the existing equal-access 
rules requiring it to treat all registrars equally (since any profits 
flowing from that rule-breaking would no longer flow to Verisign 
itself).  I suspect that it would likely increase the number of 
high-visibility players in the selling-domain-names-to-consumers 
market.  That depends on who the acquirer is, natch, but my guess (and this 
is only a guess) is that the acquirer is *not* likely to be one of the 
larger existing registrars: those companies have spent too much money 
building their infrastructure and trademarks to be willing to pay full 
price to buy NSI’s.  OTOH, this resolution won’t satisfy those who want to 
see Verisign out of the registrar or reseller business entirely.

Jon

Jonathan Weinberg
[email-masked]

At 08:58 PM 3/21/2001 -0800, Bret Fausett wrote:
>Alexander Svensson wrote:
> > ...the threat of a pseudo divestiture should probably be
> > looked at seriously.
>
>Picking up on this from the "[ga] Re: Board descisions" thread...
>
>ICANN posted four additional FAQs this evening focusing on what Verisign
>must do to obtain the four-year extension under the original agreement and
>what limitations, if any, might be placed on Verisign or the purchaser of
>the registrar assets after any sale.
>
>You'll want to review FAQs 4, 5, 6 and 7 from this:
>
>   http://www.icann.org/melbourne/info-verisign-revisions.htm
>
>I won't attempt to summarize the points made there, but many of the elements
>described by James Seng in an earlier post about what Verisign would do
>under Option A appear to be realistic possibilities:
>
>   http://www.dnso.org/clubpublic/ga/Arc06/msg01029.html
>
>      -- Bret

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Date: Thu, 22 Mar 2001 08:53:29 -0800
From: Kent Crispin <[email-masked]>
Subject: Re: [ga] Option A -- "Divestiture'

On Thu, Mar 22, 2001 at 10:35:49AM -0500, Jonathan Weinberg wrote:
>          Brets point (unsurprisingly) is worth careful attention.  The FAQ 
> materials shed new light on the issue raised by James Seng in his post a 
> few days ago:  Materials circulated by Verisigns investment bankers seem 
> to take for granted that if Verisign does divest the registrar, it will 
> nonetheless continue as a *reseller* of domain names. It seems to me that 
> this new operation would likely differ from Verisigns existing registrar 
> business in at least three ways.  First, Verisign would have to give up the 
> Network Solutions name and trademarks to the acquirer, since the existing 
> contract requires Verisign to divest[] all the assets of the registrar 
> business to the acquirer, and the Network Solutions name and trademarks are 
> part of those assets.

But of course, there is nothing whatsoever that prevents the new owner 
from licensing use of the NSI name back to VRSN.

>  So the new Verisign reseller operation would need a 
> new name.

No, it wouldn't.  

>  Second, the NSI Registrar employees, servers, intellectual 
> property, and so on would also be going to the acquirer - those, too, are 
> part of the 'assets' that must be divested.

But  there is no way to keep VRSN from re-hiring those employees, and  
the intellectual property can all be licensed.  Moreover, the FAQ makes 
clear that there are substantial questions about distinguishing what 
part of the business can be allocated to the registry and what part to 
the registrar.

> So Verisign's reseller 
> business would have to be a new business, not just NSI Registrar under a 
> different name.

Please define "new business".  There are no clauses in the current
contract that really define this, and, as the FAQ makes quite clear,
there is large room for interpretation on the part of ICANN, VRSN, and
DOC.  

Bear in mind that once VRSN commits to going down this road, there is an
associated enforcement cost that must be born by ICANN, in dealing with
the unique situation between VRSN and any buyer. 

> Third, the Verisign reseller, having taken a registration 
> from a member of the public, couldn't simply enter the name in the SRS, but 
> would have to buy that service from some accredited registrar.

But of course, that accredited registrar could simply be a new 
registrar created by VRSN.  And that new registrar could simply 
implement a pass-through.  VRSN doesn't need to do this, of course.

>          Though James's message can be read to suggest otherwise, I think 
> it's *not* likely that any divestiture could require the acquiring 
> registrar to take registrations only from Verisign and nobody else.

It doesn't need to.  The only thing that VRSN really needs to do is 
maintain its market share, and there are many many tools by which it 
can do that.

>  That 
> would tie the companies together so closely as to raise the persuasive 
> argument that the divestiture was a sham, and would, I think, violate the 
> contractual language forbidding any arrangement under which Verisign would 
> be able, 'directly or indirectly, to direct . . . the operations or 
> policies' of the new registrar.  Nor does it make a lot of sense to me that 
> Verisign would want to include such a restriction, which would reduce its 
> sale price with no corresponding benefit.

Keeping market share seems to me like a pretty substantial benefit.

> What should we think about such a result?  It would eliminate any 
> existing incentive for Verisign Registry to bend the existing equal-access 
> rules requiring it to treat all registrars equally (since any profits 
> flowing from that rule-breaking would no longer flow to Verisign 
> itself).

No, that simply isn't true.  Assume a small registrar with a small 
retail side and a single enormous reseller.  Favors to that small 
registrar could easily flow through to that reseller.

> I suspect that it would likely increase the number of 
> high-visibility players in the selling-domain-names-to-consumers 
> market. 

The FAQ notes that the retail end of the business is not particularly 
valuable. 

> That depends on who the acquirer is, natch, but my guess (and this 
> is only a guess) is that the acquirer is *not* likely to be one of the 
> larger existing registrars: those companies have spent too much money 
> building their infrastructure and trademarks to be willing to pay full 
> price to buy NSI's.  OTOH, this resolution won't satisfy those who want to 
> see Verisign out of the registrar or reseller business entirely.

There were multiple loopholes mentioned in the FAQ.  The main point is
that there are many, many ways that VRSN can arrange to maintain its
market share, and it certainly has significant interest in doing so.  

Bear in mind that we simply don't have the same incentive that VRSN does
to think about this creatively. 

- -- 
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[email-masked]                           lonesome." -- Mark Twain
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Date: Thu, 22 Mar 2001 18:42:54 +0100
From: "Roberto Gaetano" <[email-masked]>
Subject: Re: [ga] Option A -- "Divestiture'

Dave,

>
>Perhaps the irony of your note escaped you, but you offer only your summary
>opinion and no facts at all to substantiate them.

I will join David in providing another opinion unsubstantiated by facts (or 
at least questionable): it seems to me that the FAQ is biased.
A lot of effort is put in making clear that the advantages that people might 
think of having with option A are not granted, while the reverse is not 
true. But maybe we will have a comprehensive report of the pitfalls of 
option B only a couple of years down the road... ;>)

Anyway, just pick the last sentence, I found it great:
"Finally, it should be noted that the existing agreement places no 
limitations on VeriSign's ability to act as a registrar in other top-level 
domains while it operates the registry for .com, .net, and .org."
Psychologically, people will react by saying: "Oh, but then that's not a 
great deal. Maybe option B is better!".
But if you think over it for a minute, is there anything in option B that 
places "limitations on VeriSign's ability to act as a registrar in other 
top-level domains while it operates the registry" (*and* the registrar, BTW) 
for .com? The whole point we are arguing about is to operate registrar and 
registry *for the same TLD*.

>
>Whatever your extensive experience with proper staff functions, the
>analysis provided by ICANN staff is actually quite professional.  It labels
>opinions as opinions.  It analyses contract language and describes specific
>obligations and lack of obligations, in terms of common expectation about
>Verisign.

Agreed, it is professional.
Biased, but professional.

>
>Staff are not expected to be machines; professional analysis had better
>include professional opinions.

Regards
Roberto

_________________________________________________________________________
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Date: Thu, 22 Mar 2001 12:40:57 -0500
From: "Gomes, Chuck" <[email-masked]>
Subject: RE: [ga] Option A -- "Divestiture'

William,

I don't expect to change your mind but I am again bothered by your use of
the word 'extortion.'  I know that analogies are never perfect, but let me
use one anyway to illustrate how your reasoning sounds to me: Consider a
person considering buying a new car even though he/she already has a car; is
it extortion if the buyer tells the salesman, "unless you agree to these new
terms, I will just keep my old car?"

There is an existing agreement already in place; it was negotiated and
executed by all three parties after public comment and debate and it
contains terms that offer an extension until 2007 if specific conditions are
met.  A new option has now been put on the table to replace the existing
agreement.  Some think the new option is advantageous, some do not.  If that
new option is not accepted, the existing agreement will continue.

Chuck

- -----Original Message-----
From: William X. Walsh [mailto:[email-masked]]
Sent: Thursday, March 22, 2001 12:39 AM
To: Bret Fausett
Cc: [email-masked]
Subject: Re: [ga] Option A -- "Divestiture'

Hello Bret,

Wednesday, March 21, 2001, 8:58:09 PM, Bret Fausett wrote:

> Alexander Svensson wrote:
>> ...the threat of a pseudo divestiture should probably be
>> looked at seriously.

> Picking up on this from the "[ga] Re: Board descisions" thread...

> ICANN posted four additional FAQs this evening focusing on what Verisign
> must do to obtain the four-year extension under the original agreement and
> what limitations, if any, might be placed on Verisign or the purchaser of
> the registrar assets after any sale.

> You'll want to review FAQs 4, 5, 6 and 7 from this:

>   http://www.icann.org/melbourne/info-verisign-revisions.htm

> I won't attempt to summarize the points made there, but many of the
elements
> described by James Seng in an earlier post about what Verisign would do
> under Option A appear to be realistic possibilities:

>   http://www.dnso.org/clubpublic/ga/Arc06/msg01029.html

Sounds like extortion to me.

Give us what we want, or we will do this........

In any event, I see nothing there that changes my mind that the new
agreement should not be entered into.

- -- 
Best regards,
 William                            mailto:[email-masked]

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Date: Thu, 22 Mar 2001 10:03:59 -0800
From: "Bret A. Fausett" <[email-masked]>
Subject: Re: [ga] Option A -- "Divestiture'

Another point to consider in the divestiture thread is that although
Verisign may have some creative ideas about how to structure the deal, it
will likely seek ICANN's blessing for what it proposes.

In a call with financial analysts earlier this year, Verisign expressly
stated that it would vet any proposed deal with ICANN, as the cost of losing
the four year extension is too great to leave to chance or the possibility
of dispute. 

       -- Bret

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Date: Thu, 22 Mar 2001 10:09:10 -0800
From: Roeland Meyer <[email-masked]>
Subject: RE: [ga] Option A -- "Divestiture'

> From: DPF [mailto:[email-masked]]
> Sent: Thursday, March 22, 2001 4:31 AM

> In any company I know of, staff who behave in that way would have been
> sacked.  I do not say this lightly but such behaviour as I have
> witnessed is alien to me from professional staff.

Agreed. That said, it is expected from ICANN staff.
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Date: Thu, 22 Mar 2001 10:16:03 -0800
From: "Bret A. Fausett" <[email-masked]>
Subject: [ga] House Judiciary Committee Hearing

I placed a temporary archive of this morning's ICANN oversight hearing
("ICANN, New gTLDS, and the Protection of Intellectual Property") on my web
site for those who missed it.

   http://www.lextext.com/housejc03222001.html

      -- Bret

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Date: Thu, 22 Mar 2001 19:18:35 +0100
From: "Roberto Gaetano" <[email-masked]>
Subject: [ga] Report from the discussion

Folks,

I am preparing a summary of the discussion, as I promised to Philip, the NC 
Chair.

I will say that, after thorough discussion, the GA has shown rough consensus 
in favour to option A, i.e. to keep the current contract.
I will obviously quote the figures from the poll (the logical equivalent of 
the "show of hands" at a physical meeting), as already done in a previous 
post.

The reasons for the choice, as expressed by some participants, are mainly:
- - "horizontal" separation between Registrar and Registry, foreseen in option 
A, is perceived as a better deal than "vertical" separation among TLDs, and 
a better safeguard against a monopolistic position;
- - the switchover to option B is perceived as a change in policy, done 
without previous consultation of the DNSO (whose mission is to provide 
recommandations on policy), and moreover within very strict deadlines, 
absolutely inappropriate to evaluate in depth the implications of such 
change. For instance, some of the details of the new proposal, like some 
attachments, are still unknown as today. Also, this change in policy is 
considered irreversible
- - the financial advantages for the Internet community of option B are not 
balancing off the drawbacks above, as it is understood that the investment 
will be done by VeriSign at its discretion, based on a commercial logic that 
is perfectly legitimate but out of the control of the Internet community. 
The benefits for the Internet community are therefore not identifiable at 
this point in time, and it may be even assumed that other competing 
operators might invest comparable amounts of money in the infrastructure as 
well, if granted similar contracts by ICANN
- - the other claimed advantage of option B, i.e. a different management of 
.org, is minimal in value if of any value at all, because years of practice 
of uncontrolled sale of names in the TLD originally intended for chartered 
use have irreversibely polluted the namespace. Moreover, a future "cleanup" 
action to restore the original charter is specifically opposed by the GA, 
because it is considered contrary to the legitimate interest of bona-fide 
owners of .org names

I would also incidentally note that a change in the charter of .org could be 
very possible under the current contract, if VeriSign reputes this a *good 
thing*. Probably neither ICANN nor the Internet community would oppose 
enforcement of tighter controls on future registrations in .org even if the 
registry stays in VeriSign hands. Of course, this should be decided by ICANN 
and known to potential investors before the .org registrar part is put on 
sale. I bet though that this will not be done, as the economical value of 
.org, and its sale price, will suffer. ;>)

This is just the report I owe as Chair, and does not preclude in any way 
other actions, like a vote (or a straw poll) on David's comprehensive 
motion, or the presentation of a "minority position" in the form, for 
instance, of Chuck's 10-points document.

Comments welcome.
Roberto

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Date: Thu, 22 Mar 2001 13:19:35 -0500
From: Jonathan Weinberg <[email-masked]>
Subject: Re: [ga] Option A -- "Divestiture'

1.      Kent is right that Verisign has incentives to think up creative 
interpretations of the contractual language currently binding it, and that 
much of the language has room for interpretation.  It’s wrong, though, to 
suggest that therefore the language is meaningless.  In particular, I 
think, it’s wrong to suggest that there is no force to the language 
requiring that Verisign “divest[] all the assets and operations” of the 
registrar.  I *think* Kent is suggesting that Verisign and the acquirer 
might agree that on Monday the acquirer would purchase all of NSI 
Registrar’s assets, leases, employment contracts, trademarks and ongoing 
business, but that on Tuesday it would sell or license them back to 
Verisign.  But that would be a sham transaction – and as ICANN staff’s FAQ 
states, a sham transaction would not entitle Verisign to the extension it 
seeks.  Yes, the FAQ indicates that there may be close questions as to what 
constitutes the “assets and operations” of the registrar, specifically 
relating to places where the NSI Registrar currently “shares services with 
other Verisign businesses, such as engineering, customer support, or human 
resources.”  If Verisign were nominally to transfer ownership of the 
Network Solutions trademark, though, while retaining a long-term exclusive 
license to use the mark in its own business, it would *not* be a close 
question whether that satisfied its obligation to divest all of NSI 
Registrar’s assets.  It would not.  While a determined lawyer can argue 
anything, the argument that that arrangement is consistent with the 
existing contract is not an argument I could have made with a straight face 
when I was a practicing lawyer, and not an argument I would expect to get 
serious consideration from a court.

2.      Kent suggests that Verisign could simply create a new registrar to 
process registrations it takes from the public.  Indeed it could: as the 
staff FAQ makes clear, having sold the old registrar business (including 
its customer lists, trademarks, servers, 10 million or so legacy 
registrations, etc.) to the acquirer, Verisign is free to start a new 
registrar business.

3.      ICANN wants to avoid situations where it ends up in court with 
Verisign over whether a divestiture satisfies the existing contract.  But 
Verisign needs to avoid that as well: the last thing it needs is to have 
the viability of its contract extension depend on the whims of some 
judge.  So any disputes over the terms of a divestiture will end up being 
determined in negotiation between the two parties.  The most important 
factor in determining the parties' bargaining positions will be whether, if 
the matter *did* come to court, the judge would consider the deal to be 
consistent with Verisign's divestiture obligations as defined by the 
existing contract.

         I don't mean to understate the leeway that Verisign has here.  My 
point, in my earlier message, was that in considering the desirablity of 
the proposed contract, we need to keep in mind the fact that the existing 
contract allows Verisign, post-divestiture, to take registrations as a 
domain-name reseller.  But we should bottom our analysis on the actual 
provisions of the existing contract.

Jon

Jonathan Weinberg
[email-masked]

At 08:53 AM 3/22/2001 -0800, Kent Crispin wrote:
>On Thu, Mar 22, 2001 at 10:35:49AM -0500, Jonathan Weinberg wrote:
> >          Brets point (unsurprisingly) is worth careful attention.  The FAQ
> > materials shed new light on the issue raised by James Seng in his post a
> > few days ago:  Materials circulated by Verisigns investment bankers seem
> > to take for granted that if Verisign does divest the registrar, it will
> > nonetheless continue as a *reseller* of domain names. It seems to me that
> > this new operation would likely differ from Verisigns existing registrar
> > business in at least three ways.  First, Verisign would have to give up 
> the
> > Network Solutions name and trademarks to the acquirer, since the existing
> > contract requires Verisign to divest[] all the assets of the registrar
> > business to the acquirer, and the Network Solutions name and trademarks 
> are
> > part of those assets.
>
>But of course, there is nothing whatsoever that prevents the new owner
>from licensing use of the NSI name back to VRSN.
>
> >  So the new Verisign reseller operation would need a
> > new name.
>
>No, it wouldn't.
>
> >  Second, the NSI Registrar employees, servers, intellectual
> > property, and so on would also be going to the acquirer - those, too, are
> > part of the 'assets' that must be divested.
>
>But  there is no way to keep VRSN from re-hiring those employees, and
>the intellectual property can all be licensed.  Moreover, the FAQ makes
>clear that there are substantial questions about distinguishing what
>part of the business can be allocated to the registry and what part to
>the registrar.
>
> > So Verisign's reseller
> > business would have to be a new business, not just NSI Registrar under a
> > different name.
>
>Please define "new business".  There are no clauses in the current
>contract that really define this, and, as the FAQ makes quite clear,
>there is large room for interpretation on the part of ICANN, VRSN, and
>DOC.
>
>Bear in mind that once VRSN commits to going down this road, there is an
>associated enforcement cost that must be born by ICANN, in dealing with
>the unique situation between VRSN and any buyer.
>
> > Third, the Verisign reseller, having taken a registration
> > from a member of the public, couldn't simply enter the name in the SRS, 
> but
> > would have to buy that service from some accredited registrar.
>
>But of course, that accredited registrar could simply be a new
>registrar created by VRSN.  And that new registrar could simply
>implement a pass-through.  VRSN doesn't need to do this, of course.
>
> >          Though James's message can be read to suggest otherwise, I think
> > it's *not* likely that any divestiture could require the acquiring
> > registrar to take registrations only from Verisign and nobody else.
>
>It doesn't need to.  The only thing that VRSN really needs to do is
>maintain its market share, and there are many many tools by which it
>can do that.
>
> >  That
> > would tie the companies together so closely as to raise the persuasive
> > argument that the divestiture was a sham, and would, I think, violate the
> > contractual language forbidding any arrangement under which Verisign would
> > be able, 'directly or indirectly, to direct . . . the operations or
> > policies' of the new registrar.  Nor does it make a lot of sense to me 
> that
> > Verisign would want to include such a restriction, which would reduce its
> > sale price with no corresponding benefit.
>
>Keeping market share seems to me like a pretty substantial benefit.
>
> > What should we think about such a result?  It would eliminate any
> > existing incentive for Verisign Registry to bend the existing equal-access
> > rules requiring it to treat all registrars equally (since any profits
> > flowing from that rule-breaking would no longer flow to Verisign
> > itself).
>
>No, that simply isn't true.  Assume a small registrar with a small
>retail side and a single enormous reseller.  Favors to that small
>registrar could easily flow through to that reseller.
>
> > I suspect that it would likely increase the number of
> > high-visibility players in the selling-domain-names-to-consumers
> > market.
>
>The FAQ notes that the retail end of the business is not particularly
>valuable.
>
> > That depends on who the acquirer is, natch, but my guess (and this
> > is only a guess) is that the acquirer is *not* likely to be one of the
> > larger existing registrars: those companies have spent too much money
> > building their infrastructure and trademarks to be willing to pay full
> > price to buy NSI's.  OTOH, this resolution won't satisfy those who want to
> > see Verisign out of the registrar or reseller business entirely.
>
>There were multiple loopholes mentioned in the FAQ.  The main point is
>that there are many, many ways that VRSN can arrange to maintain its
>market share, and it certainly has significant interest in doing so.
>
>Bear in mind that we simply don't have the same incentive that VRSN does
>to think about this creatively.
>
>--
>Kent Crispin                               "Be good, and you will be
>[email-masked]                           lonesome." -- Mark Twain
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