9.1 Redistributing the Riches of .com: Registrar Accreditation

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9.1 Redistributing the Riches of .com: Registrar Accreditation

Dealing with the dominance of Network Solutions was the top priority of the new regime. Competition was claimed as its objective, rhetorically, but there was little support in the dominant coalition for new competing registries. The trademark interests and the Global Internet Project (GIP) activists opposed authorizing new registries able to offer new top-level domain names. (Even among those who supported new top-level domains, there were differences of opinion about how to do it.) Instead, the dominant interest groups coalesced around a policy of regulating Network Solutions and redistributing its monopoly profits to a broader class of industry participants. ICANN and the Commerce Department acted quickly to achieve this objective. [1 ]A registrar accreditation regime was proposed and implemented in a few months, and it all happened before ICANN's Domain Name Supporting Organization (DNSO), supposedly the primary source of policy recommendations regarding domain names, was constituted.

Network Solutions (NSI) and the Department of Commerce had already agreed to create a shared registration system (SRS) that would allow multiple, competing registrars to sell names in .com, .net, and .org on a retail basis. In Amendment 11, NSI had agreed to provide approved registrars with equal access to its registry services if they licensed Network Solutions' shared registration system software. ICANN and the Commerce Department, however, came to support a stronger and more active role for the root administrator. Instead of just contracting with registries and allowing registries to contract with registrars, they came to believe that creating a level playing field in the registrar market required ICANN, rather than Network Solutions, to establish its own accreditation requirements and apply them directly to registrars in the generic TLDs (gTLDs). That decision strengthened the central and regulatory character of the emerging regime.

Thus, in March 1999, ICANN issued a set of regulations that would be used to accredit any company that wanted to register domain names in the Network Solutions top-level domains. These 'registration accreditation guidelines' specified numerous financial and business qualifications for companies entering the registrar market, including paying ICANN a fixed fee of US$5,000, and a variable fee of US$1 per year for every domain name registration. In anticipation of the results of the World Intellectual Property Organization (WIPO) process (see section 9.2), the accreditation contract contained a variety of regulations to protect trademark interests. [2 ]In April 1999, ICANN accredited five registrars to participate in the ' testbed' phase of the shared registry. The choice of initial registrars rewarded dominant coalition members, particularly those that had contributed start-up money to ICANN. [3 ]

In the same month, the Commerce Department amended the Network Solutions Cooperative Agreement once again to regulate its economic relations with the accredited registrars. [4 ]The wholesale price for registration was fixed at US$9 per name-year. In essence, Commerce treated the NSI registry as a regulated utility, declaring that 'the price to be paid by registrars for each domain name registration . . . should reflect demonstrated costs and a reasonable rate of return.' [5 ]But Networks Solutions' bargaining power was evident. It retained exclusive control of the gTLD registry, and registrars had to pay a one-time fee of US$10,000 to Network Solutions to be equipped with the SRS software. NSI itself also was allowed to continue selling domain names in the retail market, making it the only 'registrar' that did not need to be accredited by ICANN.

After starting the registrar testbed in April 1999, ICANN and the Commerce Department boasted that competition had been introduced into the domain name business. [6 ]But in reality the Commerce Department was simply regulating NSI's wholesale rates and offering the price discounts achieved via regulation to a special class of businesses that paid ICANN for the privilege of accreditation and NSI for proprietary software. Later, after the new regime was fully implemented (see section 9.3), registrar competition did indeed bid down the price of domain name registration. The more significant institutional effect, however, was to put authority over almost all retail domain name registration in ICANN's hands and to reinforce the dominance of the .com registry in the global market. Once end users were forced to go through ICANN-accredited registrars to get .com, .net, and .org domain names, ICANN could impose economic and trademark-related regulations on registrars as a condition of accreditation. This gave it regulatory control over 70 percent of the market ( country code TLDs were not included in these arrangements). The arrangement also permitted ICANN to exploit its government-created gateway into the generic top-level domain name market as a funding source to sustain its own activities. With over two million domain names being registered each quarter and the number of total registrations doubling every year, ICANN was anticipating an annual budget of US$8-30 million over the next three years.

The shared registration system also greatly reinforced the market dominance of the .com domain. It decreased the price of many .com registrations and created an expanded sales force (accredited registrars) for the output of the Network Solutions registry. From the middle of 1999 to the middle of 2000, the number of domains registered in .com tripled. The first quarter of 2000 'saw astounding acceleration in .com, .net, and .org registrations worldwide,' according to an NSI quarterly report. [7 ]An especially noteworthy aspect of the growth was a massive increase in .com registrations from organizations outside the English-speaking world. International registrations increased 241 percent year-on-year, [8 ]and the gTLDs' share of global domain name registrations began to increase relative to registrations in country codes. The high switching costs associated with changing a domain name, and ICANN's refusal to create new toplevel domains for two more years (see section 9.6), gave .com towering dominance.

ICANN's plans for a US$1 per domain name fee were thwarted, however. Assailed as 'the domain name tax' by ICANN's opponents, including a still-recalcitrant Network Solutions, the fee attracted the attention of the U.S. Congress. [9 ]Under pressure from Congress, the Commerce Department forced ICANN to abandon the fee. The result was a financial crisis for ICANN that was not resolved until November 1999, when Network Solutions was fully assimilated into the regime (see section 9.3).

Accredited registrars are now assessed quarterly fees based on the share of the ICANN budget assigned to gTLD registrars; the fees vary in accord with the number of names they have registered. Translated into a per-name basis, fees assessed according to this method are closer to US$0.10 per name than US$1 per name. As of early 2001, approximately 80 accredited registrars were listed by ICANN.

[1 ]ICANN's management and staff had prepared draft guidelines for accreditation by February 8, 1999, even before it was officially designated 'NewCo' by the Commerce Department. The board adopted the draft a month later.

[2 ]Among other things, accredited registrars committed themselves to 11 WIPO recommendations, including contractual features requiring transfer of a disputed domain name, agreement to exclude second-level names designated by ICANN, payment for registrations in advance, and the domain name holder's consent to jurisdiction. ICANN, 'Guidelines for Accreditation of Internet Domain Name Registrars and for the Selection of Registrars for the Shared Registry System Testbed for .com, .net, and .org Domains,' February 8, 1999, Section II.K, 'Intellectual Property Issues.'

[3 ]CORE, the organization of registrars left over from the gTLD-MoU, was accredited as one registrar despite the fact that it consisted of a consortium of 88 different registration service providers. France Telecom, a gTLD-MoU signatory, and AOL, a GIP member, had both donated US$25,000 in start-up funding to ICANN and were vocal supporters of it in the final stages of the Commerce Department proceeding. Melbourne IT was also a CORE member and was closely tied to the Australian National Office of the Information Economy.

[4 ]Amendment 13 to the Commerce Department-Network Solutions Cooperative Agreement, NCR 92-189742, <http://www.ntia.doc.gov/ntiahome/domainname/amendment13.htm >.

[5 ]Andrew Pincus, General Counsel, Commerce Department, to Thomas Bliley, Chairman, House Commerce Committee, July 8, 1999, p. 15.

[6 ]ICANN News Release, 'ICANN Names Competitive Domain-Name Registrars,' April 21, 1999, <http://www.icann.org/registrars/icann-pr21apr99.htm>.

[7 ]'Network Solutions Announces 14th Consecutive Quarter of Record Profitability-Cash from Operations Exceeds $118 million,' Business Wire, April 27, 2000.

[8 ]Ibid.

[9 ]See, e.g., House Committee on Commerce News Release, 'Bliley Blasts ICANN Management of Domain Names, Questions Authority to Levy Domain Name Tax,' June 22, 1999. Bliley chaired the House Commerce Committee.



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Ruling the Root(c) Internet Governance and the Taming of Cyberspace
Ruling the Root: Internet Governance and the Taming of Cyberspace
ISBN: 0262134128
EAN: 2147483647
Year: 2006
Pages: 110

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