NTIA Approves .Com RA Extension

Verisign has just filed a Form 8-K with the U.S. Securities and Exchange Commission (SEC) revealing that the National Telecommunications and Information Administration (NTIA) has approved the extension of the .Com registry Agreement through November 30, 2024.

We previously reported that, on September 15th, ICANN’s Board approved the .Com RA extension’ and simultaneously approved an extension of the existing $7.85 ceiling on .Com wholesale prices through 2024. Notwithstanding that price cap extension, the wholesale pricing of .Com domains could be revisited by ICANN and Verisign if NTIA does not extend the separate Cooperative Agreement (CA), currently in force through  November 30, 2018; or does extend it but with a different pricing control.

As described in the SEC filing, the NTIA action took the form of two separate amendments to the CA, as follows:

On October 20, 2016, Verisign and the U.S. Department of Commerce (the “DOC”) entered into Amendment Number Thirty-Three (33) (“Amendment 33”) to the Cooperative Agreement between Verisign and the DOC. Except as modified by Amendment 33, the terms and conditions of the Cooperative Agreement, remain unchanged. Amendment 33 relieves, releases and discharges Verisign from all root zone operation, management and maintenance responsibilities, obligations or requirements under the Cooperative Agreement, including but not limited to, those contained within Amendments 11 and 31. Following this release, the RZMA between Verisign and ICANN became effective.

On October 20, 2016, Verisign and the DOC entered into Amendment Number Thirty-Four (34) (“Amendment 34”) to the Cooperative Agreement between Verisign and the DOC. Except as modified by Amendment 34, the terms and conditions of the Cooperative Agreement, remain unchanged. Under the terms of Amendment 34, the DOC approves the amendment to the Registry Agreement as in the public interest, which extends the term of the Registry Agreement to coincide with the eight-year term of the RZMA. In addition, the DOC retains the right to conduct a public interest review for the sole purpose of determining whether the DOC will extend the term of the Cooperative Agreement before it expires on November 30, 2018. Verisign agrees to cooperate with such a review and to work in good faith to reach mutual agreement with the DOC to resolve issues identified in such review and to work in good faith to implement any agreed upon changes as of the expiration of the current term of the Cooperative Agreement. (Emphasis added)

The Root Zone Maintainer Service Agreement (RZMA) referenced in both amendments was the major component of the CA. With its termination, and transfer of the RZMA counterparty role from NTIA to ICANN, about all that remains of the CA is the wholesale price cap. So in essence when the NTIA decides whether to extend the CA beyond 2018 or let it terminate it will be deciding whether .Com should continue to be subject to a wholesale price cap. If the NTIA conducts a public interest review to determine whether the CA will be extended beyond 2018 it will likely solicit input from the public.

The NTIA’s approval of the .Com RA extension also contains the caveat that “This approval is not intended to confer federal antitrust immunity on Verisign with respect to the .com Registry Agreement, as amended.” However, it is highly unlikely that Verisign would ever face antitrust scrutiny for its .Com pricing while it is charging a government-imposed wholesale price.

In addition to its SEC filing, Verisign has also just published a separate FAQ document providing its explanation of these developments; it is published in full at the end of this post. Let’s focus on these two questions and answers:

Q: Will the Department of Commerce extend the Cooperative Agreement?

A: The Department of Commerce has reserved the right to conduct a public interest review to determine whether the Cooperative Agreement should be extended.

Q: Will the public interest review result in changes to Verisign’s pricing for .com domain name registrations?

A: The purpose of the public interest review will be solely to determine whether the Cooperative Agreement should be extended. (Emphasis added)

That second answer is factually correct, yet incomplete – because a decision to terminate the CA would end the U.S. government imposed price cap on .Com. As we noted when reporting on the ICANN Board’s approval of the .Com RA, its adopted Resolution contained this language:

Whereas, the proposed Amendment also requires Verisign and ICANN to cooperate and negotiate in good faith to: (1) amend the .COM Registry Agreement by the second anniversary date of the proposed Amendment in order to preserve and enhance the security of the Internet or the TLD; and (2) as may be necessary for consistency with changes to the Cooperative Agreement between Verisign and the U.S. Department of Commerce. All other terms and conditions in the existing Registry Agreement remain unchanged.

The .Com RA extension became effective on October 1, 2106 when the IANA transition occurred, so ICANN and Verisign are now committed to review the RA and amend it to make it consistent with any future changes to the CA. As we read that Resolution provision, if NTIA decides not to extend the CA, or extends it with a different price control provision, the RA would no longer be consistent with it and good faith negotiations would ensue to make it so.

The direct relationship between the CA and the continuation of the .Com price freeze was outlined in the August 31st letter from the Department of Justice to Sen. Cruz, which stated:

We note that the current extension proposal contemplated by ICANN and Verisign does not change the price cap contained in the 2012 .com Registry Agreement, which will remain in effect through November 30, 2018. Nor does the current extension proposal alter the price cap in Amendment 32 of the Cooperative Agreement. Moreover, if NTIA were to approve an extension of the .com Registry Agreement, it would have the right in its sole discretion to extend the term of the Cooperative Agreement with the current price cap in place until 2024 at any time prior to November 30, 2018, the date on which the Cooperative Agreement is currently scheduled to expire. If this occurs, the $7.85 fee cap would be extended another six years to 2024. (Emphasis added)

As the last sentence makes clear, if NTIA determines not to extend the CA and lets it expire then the $7.85 fee cap would no longer be in effect.

Now it’s true that since DOJ wrote that letter ICANN’s Board approved the RA extension accompanied by an amendment to the RA extending the $7.85 price cap through 2024. But it’s also true that the very same RA obligates ICANN and Verisign to engage in good faith negotiations to bring the RA into consistency with any changes in the CA – and its termination would certainly be a major change.

The bottom line is that NTIA’s approval of the .Com RA extension constitutes the last official act to extend Verisign’s role as registry operator through at least 2024, and probably beyond as it does not alter the RA’s presumptive renewal clause.

But it does not determine .Com pricing beyond 2018, as whether the price cap or some other form of pricing control continues past 2018 depends on the NTIA’s future  decision on whether and in what form to extend the CA. And that NTIA decision will be followed up by ICANN-Verisign negotiations to render the RA consistent with the CA.

 

Here’s the full text of Verisign’s FAQ document on today’s development:

 

Frequently Asked Questions

Q: Has the Cooperative Agreement been amended to remove Verisign’s root zone

maintainer obligations?

A: Yes, those functions will now be performed by Verisign for ICANN under the

Root Zone Maintainer Service Agreement, which ICANN posted for public review at

https://www.icann.org/iana_imp_docs/63-root-zone-maintainer-agreement-v-1-0

Q: Who will authorize changes to the root zone file?

A: ICANN will authenticate and verify submitted changes, which are then submitted to

Verisign for publication, per the RZMA.

Q: Has the term of the .com Registry Agreement been extended?

A: Yes, the Department of Commerce has approved the extension as in the public

interest. The registry agreement term now ends on November 30, 2024.

Q: Was the Cooperative Agreement extended?

A: No. However, the Department of Commerce has the right, in its sole discretion, to

extend the Cooperative Agreement before it is scheduled to expire on November 30,

2018.

Q: Will the Department of Commerce extend the Cooperative Agreement?

A: The Department of Commerce has reserved the right to conduct a public interest

review to determine whether the Cooperative Agreement should be extended.

Q: Will the public interest review result in changes to Verisign’s pricing for .com

domain name registrations?

A: The purpose of the public interest review will be solely to determine whether the

Cooperative Agreement should be extended.

Q: What happens if issues arise during the public interest review?

A: The parties have agreed to work in good faith to reach mutual agreement to resolve

any issues.

 

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