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  • This is Big. ICANN To End Registry-Registrar Separation

    1. BY - Nov 10, 2010
    2. Policy & Law
    3. 20 Comments

    Will we someday see VeriDaddy?

    The ICANN board of directors has passed a resolution that will relax restrictions on registries owning domain name registrars and vice-versa.

    While specific to new top level domain names, don’t be surprised to see this extended to existing top level domain names over time.

    This was a contentious issue that was negotiated at length between all parties interested in new top level domain names. A working group went through 3,000 emails and long discussions but came up with no consensus, so ICANN decided to step in and make the call.

    Both Go Daddy and Afilias had been opposed to broad cross ownership. Afilias was pushing for cross ownership but with some limitations, since a number of registrars own equity in Afilias. Top Level Domain Holdings and Mind + Machines also hoped to see restrictions maintained. [Update: Apparently M+M was opposed to cross-ownership restrictions. However, TLDH's updates typically stated "TLDH will benefit from this continuing separation between registrars and registries"]

    The biggest losers in this new model are registries. Registrars already “own” the customers while registries will find it more difficult to enter the registrar market from scratch. (Of course they could acquire their way in.)

    An example I like to give is this: picture a rule restricting grocery stores from selling store brand goods while manufacturers are prohibited from owning grocery stores. These rules are changed, allowing grocery stores to sell their own store brands and allowing food manufacturers to open their own grocery stores. Who wins at first? The grocery stores, which can quickly get store brand product onto shelves and sell them to existing customers. The manufacturers would have to build stores and a customer base from scratch.

    Don’t be surprised if governmental anti-trust groups review any major deals between registries and registrars.

20 Comments
  • I could be mistaken, but I beleive Minds & Machines wish to see tje CO/VI restrictions lifted not maintained.

    • @ Berry – I see that Antony has blogged that today. But the Top Level Domains Holding updates the company has issued state that it will “benefit from this continuing separation between registrars and registries”

  • By the way, even the ISOC has started to wake up and smell the future beyond the ICANN (IANA) incubator. People will be headed to San.Francisco.CA instead of the ICANN meeting.

    http://www.isoc.org/ion/

    San Francisco California, December 8-9, 2010

    “Brought to you by the Internet Society, the first ever Internet ON (ION) event is designed to enable network, product and service engineers to stay ahead of the curve in terms of understanding and deploying emerging Internet technologies. It also presents them with a unique opportunity to discuss Internet standards with the people who helped create them.”

  • Looking at the JPRS situation, this could definitely create issues on the long run.

  • .
    I don’t agree with that and especially I don’t agree with the new TLDs proliferation

  • The registries will turn out just fine. Their end-users are not going anywhere. The registrar channel is the real loser as they lose the chance to offer new TLD’s and start to get bypassed by registries.

    The Winners? It will be the major internet brands: Apple, Yahoo, Microsoft, Google. Any one of these players could threaten dot-com’s dominance. More on my blog.

    Tom Barrett
    EnCirca

  • Landon White says:

    November 10, 2010 at 11:18 am

    ICANN ON PATROL:

    So there WILL Be No More Separation
    Between Church And State,

    (Cough) So To Speak …

    Hark-en and Fear Not Fellow patrons,
    For ICANN Will Patrol This trusty Adventure and maintain, steadfast fairness as usual, and and stand steady tooversee that there are … no wayward irregularities against naive Domainers. :-)

  • John Berryhill says:

    November 10, 2010 at 12:11 pm

    Andrew,

    There is a practical dynamic which is often overlooked in theories of the impact of relaxing VI restrictions.

    The underlying assumption is based in the .com situation circa 1999 in which, without an agreement with the registry, a registrar would have nothing to sell.

    What we have now is a situation in which a single registrar has rolled up roughly 40% of the market. GoDaddy’s success is admirable, but it has also had effects similar to the effects that, say, Wal-Mart has had on manufacturers of consumer products. If you want to have retail sales of a consumer product, you are going to have to get onto the shelf at Wal-Mart. If you want to get onto the shelf at Wal-Mart, then you are going to have to agree to Wal-Mart’s terms, which will reach into your manufacturing processes, labor practices, packaging, supply chain, etc. In essence, Wal-Mart becomes a member of your board, without any ownership or structural “control” of your organization.

    What GoDaddy has figured out is that their market position allows them that sort of non-ownership control over registries. Now, it is certainly their right to propose terms by which they will promote a TLD, how it will be placed as a registration option, and so on. However, if you are a registry, and I can obtain discount wholesale pricing, a percentage of your overall revenue (which effectively amounts to discount pricing), and dictate with whom else you may conduct business, then of course why do I care if I don’t own X% of your stock or have a seat on your board?

    This “GoDadddy effect” has ripples beyond GoDaddy, to the extent that registrar behavior functions as a cartel, albeit without explicit coordination.

    An environment with, say, 500 TLDs from which to choose just doesn’t function the way things did in 1997 where if you wanted a “.com”, you were going to pay $35 a year with a minimum two-year registration. Any registry that wants to sit in its own sandbox with an overpriced, underpromoted TLD can do so. Also, IT managers do not want to go to five different businesses to manage their domain names, so for these and other reasons, there is a tremendous incentive for TLD operators to work with registrars to reach appropriate distribution agreements, and that is not going to change. Consequently, there is little risk of registrars being “frozen out” by a compelling gTLD which, in some measure, has an ownership interest by a registrar or vice versa. Likewise, we should not be blind to the consequences of a gTLD effectively being frozen out by the array of exactions which registrars currently impose for promoting a TLD.

  • @John Berryhill

    The impact will be more like people ordering on-line DIRECT from the supplier and bypassing Walmart (Registrars) distribution channels.

    Those were ARTIFICIAL Channels set up by Esther Dyson, Michael Roberts, Harvard, etc. in 1998. That was an absurd meatspace structure for a pure-play cyberspace business.

    This will “allow” Verisign to roll back to PRE-ICANN days (1997?) and allow anyone with a clue and an account to buy .COM DIRECT at wholesale pricing.

  • The biggest winners here will be the Internet and registrants. Vertical integration will lead to more innovation and true competition

    While I am still expecting most new TLDs to not be very successful, many will rise above the noise, aided by enhancing the value proposition through vertical integration.

    The question I ask is what this means to domainers and the value of .COM. I am sure a Verisign – Godaddy merger might raise anti-trust issues but the bottom line is new TLDs can bundle, differentiate themselves and sell direct to consumer in a convenient manner. This means paying to get on major registrar shelf space (or competing for it) will be less of an issue.

    This is great news for new TLDs and bad news for Godaddy and other registrars. This is certainly a move in the right direction. Anything that gives big players more competition is good for the Internet and registrants.

    The big brands should control their brand and distribution. This was always a no brainer. If ICANN did not vote for VI, less big brands would apply for a new TLD given the restrictions. However, now I expect more .brand applicants.

    Good move by ICANN (and their bottom line)

    Constantine Roussos
    .MUSIC

  • Hi, This is a good time to remember the letter to ICANN authorized by Neustar, Afilias, and PIR, submit by former CEO .ORG, The Public Interest Registry, Alexa A. S. Raad:

    REGISTRY AND REGISTRAR SEPARATION POLICY
    The Registrant Pays the Check

    Under the heading, Insider Trading, the authors note that a “financially consolidated
    registry/registrar operator eliminates as much as 94% of the current penalties” for domain tasting. Further:

    One can also imagine the creative approaches that could be employed by an integrated entity, especially one that controls over 100 registrars, who can quickly run up the number of refunded or exempted registrations to make the excess deletes practice more interesting. Any remaining costs for the vertically integrated entity would be nominal and would be more than offset by revenue generated from the use of registry data to engage in more targeted, “smarter tasting.”

  • Whilst I realise that this decision relates to new gTLDs, is it fair to assume that existing TLD registries (e.g. Verisign with .com/.net) will push for a similar regime for them?

    • @ Jim – I suspect it will be negotiated on a case-by-case basis for the existing TLDs. It will be harder politically (and anti-trust wise) for VeriSign to acquire a registrar. I don’t see them rocking the boat since they want to hold on to their lucrative monopoly.

      But as for the others…don’t be surprised.

  • John Berryhill says:

    November 11, 2010 at 8:40 am

    @constantine

    I believe you are correct that strict separation would have been repellant to prospective .brand applicants, and that the Board ultimately realized that a one-size-fits-all blind rule would be too inflexible to include models in which a registrar channel simply does not make practical sense.

    If Facebook,’for example, wants to run .Facebook as an incident to membership, then having users jump over to any of a dozen other service providers to register a domain name is not something that can be well integrated into a registration scheme for the Facebook service. Anyone who has fiddled with, and given up on, a .tel domain name understands the irritation of dealing with the artificially-imposed registrar layer on top of a “TLD as application” model.

    I understand the concerns of registrars worried about being locked out of any “just like .com” gTLDs, but that concern seems more reflexive than reflective. TLDs intended for application-independent or brand-independent purposes, are going to gravitate toward the existing registrar distribution infrastructure for the same reason that Willie Horton robbed banks.

    But getting this roadblock out of the way of .brand TLDs takes certain elements out of the peanut gallery of new TLD opponents, and makes them participants, and I have to believe the Board understands that it consequently broadens institutional support of ICANN in the long run.

    • So here’s my million dollar question: do you think some of the incumbents that were fighting this will make some sort of legal challenge? Or will they just find a way to exploit it themselves?

  • John Berryhil says:

    November 11, 2010 at 8:42 am

    Ack! Willie Sutton, not Horton.

  • “…do you think some of the incumbents that were fighting this will make some sort of legal challenge? Or will they just find a way to exploit it themselves?”
    ===

    Neither, many have tens of millions of dollars in their Reserve Funds.

    They will likely find an island to buy and retire playing video games and watching HDTV.

  • Some of the highly vocal advocates may come to miss some of the safeguards Vertical Separation would have afforded their planned endeavors.

    Ironically they have a lot more at stake than some of proponents of Vertical Separation. But that all that gold glittered so brightly :)

    It will be interesting to see the Boards full reasoning and staff’s analysis.

    Interesting times.

    The Winners? It will be the major internet brands Do you think they are all going to go out and buy some registry software for a PC in their office LOL?

    It was quite entertaining to see the IP crowd argue the most economically advantaged would be applicants needed special treatment.

    All that will happen is what happens now with registrars, they will outsource to specialist registry companies like the specialist registrars (MarkMonitor etc.) who look after .brand registrations.

    Even if the ICANN structures don’t mirror the realities of marketplace, it won’t fundamentally change the underlying the market. All that will change will be the method of compliance hence the rider from the Board. More cost for registrants?

  • I thought this is useful to see different prospect. Experts, please help me answer the below questions.

    Registry:
    1. This decision is good because, now the registry owners don’t need to depend on the registrar to put registrar marketing dollar, resources and place it in the top in their list to SELL more domains.
    Now new TLD owners can build their own registrar (build new or buy an existing one) and sell more domains, pump more resources and makerketing dollars to be successful…This will get us lot of innovation because registries can spend more money in registrars…..
    Q1: ISN’T THIS TRUE?

    Registrar :
    Small: No difference
    Big : They can build a successful new TLD by going thru their own channel like eNom.

    But current registrars have threat from registries to enter in to this registrar business…
    Q2: is this true?

    Q3: If Enom applies for a TLD, do you guys think
    other small registrars or godaddy does not want to sell that TLD?

    Domainer: They do the same as current …buy more names and make more money.

  • Landon White says:

    November 11, 2010 at 4:50 pm

    @ Andrew Allemann

    So here’s my million dollar question: do you think some of the incumbents that were fighting this will make some sort of legal challenge? Or will they just find a way to exploit it themselves?

    ——————-

    Major Boys will put on a big posture show and make a lot of legal/Media noise but they will sell each other out behind there backs,
    (i say behind the scene the deals have already been made)and the players are in place …

    Money talks nobody walks!

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