ICANN - Handing out a License to Steal?

Posted in Fri, 25 Aug 2006 14:09:00 GMT

George Kirikos discusses ICANN's proposed tiered pricing which will allow registrars to charge whatever they want on a per-domain basis. This is also being discussed on Slashdot. This currently covers the biz, info and org domains. The com TLD was recently renewed but the speculation is that it may go this way when it comes up for renewal again. Differential, per-domain per-year pricing has been confirmed by Vint Cerf of ICANN. Theoretically, Google could be charged $1million or even $1billion per year for say google.biz.

One consequence of the Internet and the success of companies like Google, YouTube, etc. is that comanies in other industries, whether they be ISPs or registrars want a piece of the action. The easiest way to do it is to charge the successful companies for things like bandwidth usage, domain names or something else. We've already seen this with the Net Neutrality debate and now we have this. One way for registrars and ISPs to take advantage of these potential windfalls would be to base their charges on a percentage of historic or estimated future profits.

Differential pricing is a bad idea for industry and innovation but a great way to extort money, essentially a license to steal, for registrars. Let's say you start a new site with nubuzzwrd.com, a domain name that is initially worthless. Let's say the site isn't even in public beta but the biz registrar finds out you have VC funding. Would you be surprised if nubuzzwrd.biz suddenly goes up to $1million/year?

George makes a good case about domain pricing being used as political weapons. If the com TLD gets renewed with the same terms, the com operator could easily put competitors out of business by charging $1billion/year for say GoDaddy.com and Tucows.com. They could effectively silence sites they don't like say VeriSignSucks.com. And just imagine if the head of the TLC operator happens to not like NYTimes.com or FoxNews.com.

Vint says there are some "protections" built-in because there would be a 6-month notice to raise prices and an ability for registrants to renew for up to 10 years at "old prices." We've already seen how this won't protect people who are crossing TLDs from .com to .biz. Also many companies are in business for much longer than 10 years. A registrar can just look at the earnings for say Google, GE or Goldman Sachs and jack up the price to a percentage of the company's historic annual profits. They can even go for estimated future profits. What would Google or GE do? Give up their domain name and Internet presence?

This is extortion and a license to steal, plain and simple. What are Vint and ICANN thinking? These are just proposals now. Hopefully this will be removed from the proposals or one has to start questioning the privileges ICANN has been given.

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  1. Ajay said 1 day later:

    Seems to me like you’re doing some knee-jerk fearmongering. This is the first I’ve heard of this but I doubt it will cause any problems. I highly doubt they will be able to charge a high amount for something like google.biz since google already has google.com and the associated brand. You cannot just go register judelaw.com as he already has a lot invested in that name. As for the nubuzzwrd.com example, it would be pretty stupid for that company to publicize their new name AND THEN go register the domain name. They’ll do what everyone does now, just register a whole bunch of cheap domain names and then use the one they like best later. The political consideration about foxnews.com is just hot air. Also, how would a registrar be able to jack up prices on an already registered domain when you can reregister a domain as many times as you like? Do you really think they will let valuable domain names like ge.com come free after 10 years? No chance.

    There is a thorny question here which is that it costs almost nothing to create a new domain name and maintain it but the name alone can have huge value, enough to create huge secondary markets. What is the best way to deal with this? Should food.com really go to the person who registers it first?

    Here’s the system I would favor. Registrars can auction off generic names like food.com or dogs.com for the best price they can get. Conversely, they give out domains like potatochipsandsourcream.com, that nobody really wants, for something much closer to maintainence costs, 10 cents per year or whatever it is. Just as it is now, if you already have a brand built up on a name, you get first dibs on that domain.

  2. John Wang said 1 day later:

    Ajay, I’m not sure you understand the 10 year issue. The primary issue I see with the 10 year renewal period is that George Kirikos, who has spoken to Vint about this, says it’s 10 years from whenever the new TLD contract starts. After the initial 10 year period is up, the registrar is no longer obligated to honor grandfathered prices. At that point, the registrar will be free to jack up GE.com to whatever they want (if the .com TLD goes the same way as the .biz proposal). So it doesn’t matter if you let it become free or not, you’ll still get higher prices, perhaps massively higher.

    As for the nubuzzwrd.(com|biz) issue, if the name is reasonably generic, you may have to register it under every generic TLD you may eventually want right away. Today the impression I get is most companies start off with .com and perhaps .net then adding other TLDs as they grow. You may not be able to do that cost effectively once the new proposals go through. Of course, you can always choose a made up term and then register it everywhere in the world to prevent others from using it but not every term is like that.

    I agree the new proposal would be less harmful if it allowed the current registrant renew indefinitely at today’s prices (or at a capped percentage per year), but that’s not the way it has been described.

  3. Ajay said 1 day later:

    Oh I understand the 10-year issue alright. All you need to think about that is what I said “Do you really think they will let valuable domain names like ge.com come free after 10 years?” There is no chance that GE will let the registrars get away with changing the price after 10 years. For George or you or the registrars to suppose that this change would be possible is a fantasy.

    As for the nubuzzwrd.com issue, right now that is not an issue as all prices are the same. Do you really think companies will allow the registrars to create a system where they create value in a nubuzzwrd.com domain name and then are charged a lot for nubuzzwrd.biz years down the line? Just as there are certain rights for trademarks and such right now, there will be the same for nubuzzwrd.com/biz, if or when domain name prices are made more flexible.

  4. John Wang said 1 day later:

    The reason I thought you didn’t understand the 10 year issue is you wrote “how would a registrar be able to jack up prices on an already registered domain when you can reregister a domain as many times as you like? Do you really think they will let valuable domain names like ge.com come free after 10 years?” After a 10 year period, the issue has nothing to do with whether you can reregister a domain or if it goes free, it has to do with the registrar changing prices which is what we’re talking about now. If the legal agreement allows the registrar to jack up prices I’m not sure what GE can do. Are they going to say it’s illegal when it’s been legal for 10 years in the registrar’s TLD contract? If GE wants to complain about this, I think they have to do it now. Registrars are for-profit companies and if their contract allows them to charge more, I don’t see why they wouldn’t do it.

    As for whether I think “companies will allow the registrars to create a system where they create value in a nubuzzwrd.com domain name and then are charged a lot for nubuzzwrd.biz years down the line?” I think that comes down to whether registrants will allow these proposals to go through or not. I’m not sure what the registrants can do once the TLD contracts are written and signed. If registrants want to take action, I think they need to do it now before the proposals are approved and signed.

    You seem to believe registrants can complain and prevent things from happening after the fact, even 10 years after the new TLD legal contracts allowing them have been in effect. I’m not sure why you believe this.

  5. Ajay said 1 day later:

    Actually, I’m talking about the same thing you’re talking about, the proposals currently in discussion. There is NO chance the current proposals will pass as they will be shot down by GE and other companies. If they somehow pass because the ICANN board is delusional and don’t allow the companies’ input, the companies will create their own DNS system. For people like you and George to make a big deal about a silly proposal like this shows a lack of understanding of how small a system DNS is and how a replacement can be easily financed by the companies involved.

    btw, you mentioned network neutrality in your original post and I left it aside till now because it’s a separate point. However, network neutrality, in terms of disallowing a fast lane and a slow lane on the internet, is dead and will never make it through congress. And the internet will be better for it, as high-priority traffic like VoIP will move faster.

  6. John Wang said 1 day later:

    The reason people like me and George make a big deal of this is exactly because the contract proposal is in discussion and has not been put into effect. You are saying it’s not a big deal because the contracts will be changed but that hasn’t happened yet and even you admit it may not happen. Until the the proposed contracts are reworked, I think discussion of the contracts in their current form is fair game. You wrote you hadn’t heard of this issue until just now. Perhaps companies like GE need bloggers to highlight these issues so it even shows up on their radar at all.

    As for network neutrality, I think it will be interesting to see how differential bandwidth pricing plays out. Without net neutrality, I prefer a situation similar to what we have today where end users can pay to be on the fast lane, e.g. FiOS vs cable vs DSL vs dial-up. I’m not convinced having ISP charge differential rates to websites is a good thing. The financial industry often charges a percentage of profits/assets and I don’t see what will prevent ISPs from doing the same thing to Google and MySpace; in fact I think that may be their wet dream. That’s certainly good for the ISPs but not so good for the websites. I don’t think it’s good in general because the ISP is just supplying the pipe and in many cases the ISPs are still essentially monopolies. The telecom deregulation act was supposed to lead to multiple DSL providers in an area but in most areas you still only have one. One DSL provider, one cable provider. The telecoms were supposed to let competitors use the last mile at competitive rates to build competition which has never happened. If they don’t truly open up the last mile like they were supposed to, I don’t see why they should be allowed to charge websites whatever they want.

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