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Congressional Testimony on Proposed ICANN/Verisign Agreement
Wednesday, June 7, 2006
Statement of Marc Ostrofsky, President and Co-Founder Internet REIT, Inc., before the
Committee on Small Business
United States House of Representatives
June 7, 2006
On behalf of Internet REIT, Inc., of which I am a co-founder and president, and on behalf of the
Internet Traffic Association (ITA), I am pleased to have this opportunity to present testimony as
part of the Committee's hearings on whether ICANN creates a barrier to small business. Internet REIT,
which is headquartered in Houston, Texas, is in the business of aggregating and developing Internet
properties such as Bands.com, Shows.com, VietnamWar.com, AmericanRevolution.com and others. ITA is
an association of businesses in this same industry. This brief statement seeks to outline generally
our primary concerns with ICANN's proposed .com contract with VeriSign. Specifically, we feel this
agreement is unfair to small businesses such as Internet REIT and ITA members because:
- It will raise significantly the cost of doing business without sufficient
justification
- It ignores and shuts the door to alternatives which could decrease these
costs by a significant amount
- Opens the door to unfair competition by VeriSign.
Harmful Cost Increases Without Justification
First, the ICANN-VeriSign agreement provides for increased registration costs on all .com domain names.
In statements we have seen, VeriSign argues that these costs are negligible; so small that they do not
have any impact on a business wishing to maintain a Web presence. We, however, could not disagree more.
With regards to businesses like Internet REIT, whose business is registering domain names for development,
any increases in registration costs has a significant impact to our bottom line. In this case, the
increases permitted under the VeriSign contract would cause us to incur over $1,000,000 in additional
domain registration costs each year. Further, any small business trademark holder must necessarily
register hundreds or thousands of domains in order to sufficiently protect their marks under current
trademark laws (both U.S. laws and those which have evolved from ICANN's Uniform Dispute Resolution Policy).
Not only must these businesses seek to register domains that contain their actual marks, they must
also register large numbers of domains that are "substantially similar" to their marks. Doing so is a
significant expense to small businesses which only becomes more significant and burdensome under the new
contract. Other examples exist as well, but the bottom line is that these increases disproportionately
harm small businesses. The contract gives VeriSign almost unfettered discretion to unilaterally raise
rates with little to no accountability.
Ignoring Competitive Alternatives
Not only does the VeriSign contract assure increased costs, by entering into it, ICANN will have turned
its back on other potential bidders who could greatly decrease current costs. As an example, in the
bidding for the .net registry, ICANN received bids (including one from VeriSign) for $4.25 per name
(including the $0.75 per domain ICANN fee). We believe that if the .com registry was also put out
for bid, similar competitive bidding would occur, and probably to an even greater extent given the
tremendous volume of .com registrations. However, as it is, ICANN has undoubtedly chosen to select
the highest of all potential bids. We believe this is directly related to the settlement being reached
between those two parties and, consequently, both sides appear to be placing the burden of their
past litigation squarely on the backs of consumers. This is only made more significant by the fact
that the proposed agreement is for a long, six year term and has almost automatic renewal. If the
proposed agreement is permitted to go through, there is little-to-no chance that VeriSign or the .com
registry will ever be subject to competitive forces.
Unfair Competition
Thirdly, the agreement would open the door to further unfair competition by VeriSign. VeriSign has a
track record of using its unique monopoly position to maximize its profits in the form of SiteFinder
and its Central List Service, both of which competed unfairly with numerous small businesses. VeriSign,
by virtue of its unique position, has the competitive advantage of superior information not available
to others. If allowed to compete, small businesses in its crosshairs would not stand a chance. The
SiteFinder agreement does nothing to assure the Internet community that such unfair competition will
not take place again.
Questions
On behalf of Internet REIT and the ITA, I would like the Committee to ask ICANN the following
questions:
- Why is the VeriSign no-bid solution preferable to other solutions, including
one which would put the .com registry out for bid?
- To what extent did the settlement between ICANN and VeriSign contribute to
the new agreement which ensures price increases and shuts the door to competitive bidding?
- Given VeriSign's past history of competing unfairly and outside the permissible
boundaries of its original contract with ICANN, why have prohibitions prohibiting such acts not
been put in place?
- What justifications are there for increasing .com domain registration costs
as proposed under the agreement when recent competitive bidding for the .net registry
(including a bid submitted by VeriSign) shows that it can be done far cheaper?
Thank you for this opportunity to appear before the Committee today. |
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If you are a domain name owner, website owner, or a hosting company
and have an interest in selling your domain name portfolio, we would
like to speak to you.
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