I slogged through it so you don't have to -- ICANN Vertical Integration WG for dummies

[Eric Brunner-Williams <brunner () nic-naa net>]

There are a few people who have some passing interest in ICANN so I 
will inflict upon the list my few paragraph summary of things that 
matter, see also my July 2nd post: I went so you don't have to -- 
ICANN Bruxelles pour les nuls.

The initial report of the 65 person VI WG is published. Registry 
contracts executed in the 2001 and 2004 new gTLD rounds limited 
Registry ownership of Registrars at 15%, an artifact of the VGRS/NSI 
split up, with no limit on registrar ownership of registries, allowing 
the formation of NeuLevel (.biz through Melbourne IT and NeuStar), and 
the formation of Afilias (.info by several registries).

At the Nairobi ICANN meeting the ICANN Board established the 
cross-ownership in either directions at 0%, and called for the GNSO to 
originate some alternative to strict structural separation, if it 
could arrive at such a policy be consensus. In DAGv4, publish just 
before the Brussels meeting, ICANN Staff proposed a cross-ownership 
cap of 2%.

That sets the stage.

The Initial Report is the first step towards policy concerning the 
possibility of allowing vertical integration in the DNS 
registry-registrar market.

There are three basic positions on the issues, and a fourth position.

The three basic positions are:
(a) stay at 15%, that makes compliance easy, and no one has really 
gamed this restriction,
(b) allow full integration conditionally, with serious compliance, and 
allow several exceptions (see also the fourth position)
(c) no restriction on integration, no harms will result so compliance 
is not important, and exceptions are unnecessary (see also the fourth 
position).

These policy positions are advocated by:
(a) Afilias, PIR, GoDaddy, several NomCom appointees and others, 
including myself (for CORE), subject to some functional exceptions 
relating to registry services provisioning and market share,
(b) NeuStar, Network Solutions, Verisign, Enom, and several others,
(c) Several smaller (than the top 4) registrars and some people from 
the Business Constituency and some Free Market ideologues.

In terms of balance of forces, it is pretty much a three-way tie.

The fourth position is the Intellectual Property Constituency, which 
seeks an exception for brand owners, and no others, from whatever 
limits are proposed on cross-ownership. It has no support outside of 
the IPC, but when all the inchoate "exceptions for X" are summed, 
there is the appearance of strong support for what is called "single 
registrant" type applications.

I recommend to those employed in the ISP industry the statement of the 
ISPCP, at pages 90 and 91.

There are a lot of nuances, or tinfoil hat dress up opportunities.

If Verisign, Afilias, NeuStar, CORE and  Midcounties Co-operative 
Domains run almost all of the gTLDs, and are ineligible to provide 
registry services to the new gTLD applicants, what existing operators 
will be favored? What capitalization will start-up operators have to 
secure to meet the SLA, DNSSEC, continuity instrument and other costs 
in excess of the application fee and subsequent fees the new 
applicants must capitalize?

Are the Free Trade Guys and ICANN's economists right, the market will 
correct any abuses and competition authorities will be there when the 
market doesn't correct an abuse?

Is "continuity" or "change" the better policy w.r.t. the registry 
function and the registrar function?

I trust this will be at least as useful as the jrandom luser plaint 
concerning what singular Animal, Mineral or Vegetable controls the 
singular capital-I Internet and the IANA function sniping.

Oblig disclosure. The VI WG has been more than a quarter of my paid 
time since it began. I'm in the "continuity" camp and my Statement of 
Interests is linked to from the Initial Report. An outcome I'd like to 
see avoided is registrars preferentially selling their own-or-partner 
inventories, resulting in a by-registrar-affiliation partition of the 
non-state DNS as a market not dependent upon state actors, resulting 
in reduced competition with the legacy gTLD registry operators and 
their properties. Yeah. I know. Nothing other than redelegation of 
.org has created competition for Verisign.

Eric