Late on Tuesday, March 13th in San Jose, Costa Rica ICANN’s Board and its Governmental Advisory Council (GAC) met in open session to discuss a wide range of issues.
The meeting began with the New Zealand delegate expressing the view that ICANN’s biggest failure was in enforcing its own contracts with registries and registrars. While we agree that ICANN needs to improve in this area, we certainly wish that GAC members would express equal concern that ICANN has accredited UDRP providers with the power to extinguish or transfer domains with no contractual relationship at all, and that as a result they are free to engage in questionable practices that undermine the legitimacy of the UDRP arbitration process and abet encouragement of forum shopping by complainants.
The New Zealand delegate then went on to declare that improved contractual compliance efforts “may be expensive, but there’s no reason domain names should stay so cheap”. We must take strong exception to this comment, as it evidences a lamentable lack of understanding of ICANN’s proper role as well as the economic underpinnings of the registry/registrar ecosystem. Other than .com and .net, where VeriSign’s ability to increase registry pricing of the most preferred legacy domains is somewhat limited by contract, all other gTLDs are free to charge whatever they think the market will bear – and of course ICANN has zero ability to dictate pricing of ccTLDs controlled by national governments. As for registrars, one of ICANN’s great successes has been to encourage vigorous price and service competition at the retail level to the benefit of all domain registrants.
ICANN is the technical coordinator of the DNS, not a price control entity, and the notion that it should exercise some nonexistent power to raise domain pricing to expand its already mushrooming staff and responsibilities seems completely wrongheaded to us – especially on the eve of a wave of 1,000 or more new gTLD applications which will being several hundred $million in new application fee revenues into its coffers – and by ICANN’s own estimation will likely double its cash flow on an ongoing basis.
Yet there are ongoing developments discussed at today’s meeting that could well bring about higher baseline pricing of domains. Another key topic was the ongoing negotiations between ICANN and its Registrar Stakeholder Group to beef up the registrar Accreditation Agreement (RAA), particularly in response to urgent requests from national law enforcement agencies. And the heart of those negotiations is an increased effort to obtain and confirm valid WHOIS data to confirm that registrants are legitimate and can be readily contacted, and that their identification data is retained. ICANN staff reported that the negotiations could be concluded within the next few weeks, and that incentives will be offered to encourage quick registrar adoption.
ICANN is increasingly taking on a quasi-regulatory role, and every regulation is a tax upon those who must implement it with those compliance costs passed on to users. While regulations may well have merit, more is not necessarily better and some cost/benefit analysis is always in order to ensure that the end justifies the burden of the means.
We don’t have to look far to estimate the cost of enhanced WHOIS verification. ICM registry already employs such measures for the .XXX domain, and at a session on WHOIS compliance held the previous day the CEO of ICM Registry described the scope of its effort and their price. ICM expends about $6 per registrant for WHOIS verification; on average, each registrant purchases three domains, bringing the per domain price down to $2. ICM’s pricing for adult content domains is substantial, so this cost is a relatively small percentage of the total annual registration price. But WHOIS compliance will be a much higher percentage of the price for incumbent gTLDs as well as many of the new ones on their way. Of course, registrants may pay for their domains for up to ten years at a time, and it is not yet clear what requirements will be placed on registrars to verify the WHOIS data of existing registrants, and all of that will affect how this enhanced compliance affects domain pricing by registrars.
Nonetheless, we suspect that the cost of registrant WHOIS verification for all gTLDs will be similar to what ICM now expends, and it is not trivial. In a highly competitive marketplace registrars will have no choice but to pass this cost on to registrants. So, while we sympathize with the need of law enforcement to have the ability to identify bad actors, and understand that effective WHOIS verification can prevent many ill-intentioned domains from ever being registered, it is also important that these new steps to ensure domain integrity remain feasible in scope and reasonable in cost.