ICANN Deal Gives VeriSign Exclusive Control of Dot-Com Registry

The Board of Directors of the Internet Corporation for Assigned Names and Numbers (ICANN) has given its final approval to a settlement that ends legal disputes with VeriSign and anoints that company as the operator of the lucrative dot-com registry through 2012.

The deal is now being sent to the U.S. Commerce Department for its OK, which would likely be the final approval needed, though court challenges from other registrars remain a possibility.

ICANN said the settlement would “clear the way for a new and productive relationship between ICANN and VeriSign.”

The ICANN board voted 9 to 5 with one member abstaining to approve the deal, which has been criticized since it was first floated late last year by registrars who say the deal enriches both VeriSign and ICANN at the expense of numerous other registrars.

The deal ends years of lawsuits and countersuits, most stemming from VeriSign’s controversial SiteFinder service, which it put into place in 2003 to redirect users who mistyped URLs to VeriSign-controlled domains. The company eventually shut that service down under demand from ICANN but then sued the agency, saying its rights had been impeded. Against that backdrop, the two sides began strained negotiations aimed at extending VeriSign’s control of the dot-com domain.

Windfall Seen Possible

The deal could be lucrative for VeriSign, with the contract containing provisions allowing it to raise the prices it charges domain re-sellers and end-users by 7 percent annually starting in 2007, though it is limited to four price hikes during the life of the agreement. The deal was crafted to give existing customers the right to register at the current price of US$6 a year for up to 10 years.

The agreement brings to a close what ICANN President and CEO Paul Twomey called a “long-standing cold war between ICANN and registry services.”

Parties on both sides of the deal were quick to support or assail it.

The Association for Competitive Technology (ACT), a Washington, D.C.-based lobbying group, said the agreement would help create a more stable and secure Internet. VeriSign is widely seen as the most experienced and qualified domain registrar.

“The agreement will give ICANN the financial security it needs to fend off efforts to usurp power by the UN and repressive regimes such as China and Iran,” said Jonathan Zuck, ACT’s president.

Zuck added that VeriSign can now invest in improving the domain, knowing it will have control and a revenue stream from it for at least the next six years and possibly longer, since the deal allows for a renewal without a competitive bidding process. “It’s the difference between creating incentives for just ‘good enough,’ and incentives for investment in long-term solutions.”

Complaints Linger

Other registrars were among those who were quick to condemn the agreement, arguing that ICANN missed an opportunity to create lower domain prices through enhanced competition.

Eight domain registrars — including BulkRegister, Network Solutions, Tucows, Register.com and GoDaddy — formally protested the agreement. They say the agreement — which will potentially generate as much as $3.29 billion in revenue over the life of the deal — is much more lucrative for VeriSign compared to an earlier proposed settlement.

“The proposed agreement … is fundamentally flawed,” Eric Rice, General Manager of BulkRegister, told the E-Commerce Times. “It will give one company the ability to raise prices for the most popular domain extension without any industry review or justification.”

Rice noted that his firm supported ICANN’s controversial decision to award the dot-net registry to VeriSign, but said the new deal builds in price hikes when technological improvements and other factors should mean lower prices for consumers and businesses that want to register domains.

The settlement is great news for VeriSign, since the domain registries it operates are among its more profitable businesses, said Credit Suisse analyst Philip Winslow.

“We believe that VeriSign’s decision whether to increase prices represents the greatest free cash flow leverage point for the stock,” Winslow wrote in a research note.