VeriSign/ICANN Deal Worth Over $3 Billion?

[Dave Farber <dave () farber net>]

-------- Original Message --------
Subject: VeriSign/ICANN Deal Worth Over $3 Billion?
Date: Wed, 01 Mar 2006 09:57:18 -0500
From: Richard Forno <rforno () infowarrior org>
To: Blaster <rforno () infowarrior org>
CC: Dave Farber <dave () farber net>

VeriSign/ICANN Deal Worth Over $3 Billion?
By Sean Michael Kerner
http://www.internetnews.com/bus-news/article.php/3588316

UPDATED: Opponents of the proposed revised deal between ICANN and VeriSign
for control of the .com domain space have now put a price tag on the deal.
And it isn't pretty.

According to BulkRegister, VeriSign stands to make over $3 billion dollars
by 2012 under the terms of the new deal, if approved. The deal has also
raised concerns in Congress on potential antitrust grounds and one registrar
is encouraging all internet users to write their member of Congress. Against
this backdrop, ICANN is scheduled to meet today in a special board meeting
to discuss the deal.

A spokesman for VeriSign disputed the claims by BulkRegistrar, and
questioned how it arrived at the $3 billion figure.

The new revised deal was proposed at the beginning of February as an
updateto an October deal that was supposed to end all outstanding litigation
between ICANN and its chosen guardian of the dot com domain, VeriSign. It
has faced fierce criticism from registrars who are opposed to its renewal
terms and the fact that it allows VeriSign to increase domain pricing.

Currently wholesale domain pricing, that is the price that VeriSign charges
to ICANN approved registrars is $6.00. The revised deal would enable
VeriSign to raise domain pricing in at least 4 of the next six years by 7
percent which leads to a 2012 domain price of $7.86 according to a
calculation by BulkRegistrar. Based on an estimate of 47.6 million dot com
domains in 2006, BulkRegistrar estimates that VeriSign will gross $285.5
million this year from its dot com mastery.

With the conservative expectation that dot com domain registrations will
grow at a 10 percent growth rate, BulkRegistrar has forecast that in 2012
there will be 84.3 million dot com domains registered. The cumulative
calculated gross revenue from 2006 through 2012 including pricing increases
is forecast to yield VeriSign a total of $3.29 billion dollars.

Under the terms of the October deal, VeriSign could actually have raised
prices in all 6 years which would have grossed an additional $140 million of
dot com revenue.

"The $140 million difference between the two is only 4%, which is why we
believe there is very little difference at all between the new and "revised"
agreements," Eric Rice, General Manager for BulkRegister told
internetnews.com. "The consumer is still going to have to pay higher prices
for domains when they should be enjoying decreasing prices."

Rice argued that the "revised" and original agreements still give VeriSign
the authority to increase prices without cost justification (but now in four
of six years instead of in all six as originally opposed) when domain name
rates should be going down, not up. It still allows VeriSign to
automatically renew its management of the .com registry in 2012 without
review or an open, competitive re-bidding process -- something every other
Registrar has to go through.

"So, all the "revised" agreement does is decrease VeriSign's potential
revenues by a mere 4% over four years," Rice said.

In a blog posting polemic, registrar GoDaddy's CEO and founder Bob Parsons
railed against the deal alleging that VeriSign can uses the same equipment
for dot com that is uses for .NET to run the registry.

"Because of today¹s super computer and super storage architectures, and by
VeriSign's own admission (after all its goals have always been super
scalability) they can do everything they want to do with the .COM registry
on the same framework that¹s been put in place for the .NET registry,"
Parsons wrote. "This means that the incremental cost for VeriSign to operate
the .COM registry is quite manageable ? the same equipment runs both
registries."

Parsons has even gone so far as to include a sample letter which he suggests
could be sent to member of Congress on the issue.

At least one member of Congress has already taken notice of the issue
though. Representative Rick Boucher, who is a co-chair of the Congressional
Internet Caucus has written letters to the Department of Commerce and the
Department of Justice expressing his concerns about the revised deal.

"The proposed perpetual control in the revised settlement agreement raises
serious anticompetitive concerns with wide-ranging global implications."
Boucher wrote. "To allow market forces to work, the settlement agreement for
the .com registry should include a competitive bidding process for renewal
at an early time."

Updates prior story to include comment from VeriSign



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