Original URL: http://www.theregister.co.uk/2005/05/03/verisign/

Verisign and .net: a winner all the way

Deeply flawed

By Kieren McCarthy

Posted in Financial News, 3rd May 2005 16:24 GMT

Analysis ICANN skewed the process to select a new owner for the .net registry in favour of incumbent owner VeriSign. Our in-depth investigation into the process, which has proved highly controversial since a final report gave the six-year contract to VeriSign, has revealed that ICANN:

A redrafted version of the evaluation report, carried out and produced by US company Telcordia was due two weeks ago. It has failed to appear and will now be released mere hours before a special meeting of the ICANN Board later today. That meeting's first topic of conversation is ".Net discussion". This gives the absolute minimum amount of time for review of the report either by the Board or the public.

Last week ICANN publicly announced it has already "reached agreement in principle on all substantive terms" with VeriSign over running the .net registry. It also informed us that even if the other bidders have further complaints about the report, it will not consider them.

Last year, ICANN stated in its own budget report that the lawsuits held against it - the vast majority of which stem from VeriSign - had cost so much that it had been forced to held its staff numbers down by a third and that that had materially affected its ability to do its job.

VeriSign publicly threatened to bring another lawsuit against ICANN over the .net selection process, which it claimed infringed its existing contract with ICANN, unless changes were made to the process.

Those changes, all of which appeared in ICANN's final report, combined with the selection of a candidate with known links to VeriSign, resulted in VeriSign winning the registry's ownership to the dismay of everyone else involved in the process.

Among the complaints made publicly regarding the process and the report have been (in alphabetical order):

All of these complaints were placed on ICANN's designated public forum for discussion of the .net report. They were subsequently held by ICANN's lawyer to be illegitimate as concerns the official decision-making process. Parties were instead asked to resend by post a letter containing their points.

These letters were then passed to the company that carried out the report, Telcordia, which was the subject of the vast majority of the criticisms. Telcordia was asked to produce a redrafted report but is aware that whatever form that redrafted report takes, it will be accepted and put forward for approval by the ICANN Board and not subject to further review.

Telcordia was owned from 1997 until earlier this year by the same company, SAIC, that owned VeriSign (formerly Network Solutions) from 1995 until 2003. Telcordia and VeriSign started and ran a joint partnership called Enum World from 2000 to 2001 where executives from both companies made presentations to governments and companies across the globe.

Telcordia and ICANN have both refused to provide the list of Telcordia staff that were on the evalution committee.

Comment:

The bias for VeriSign written into the .net process by ICANN is remarkable. VeriSign and ICANN have been at loggerheads ever since ICANN's formation in 1998. VeriSign has consistently stymied ICANN attempts to open up the Internet market, and through a range of lawsuits has tied the organisation up fighting legal battles.

We have always suspected that VeriSign's lawsuits would be used as a bargaining chip further down the line and maybe with the .net reallocation, that moment has come. Continued ownership of .net for six years means VeriSign can be certain to maintain its grip and enormous influence over the Internet. At the same time, if ICANN was freed of the legal burden VeriSign has placed on it, it would have far greater funds and resources in its fight to be recognised at the Internet's de facto authority.

A deal between the two would make a lot of sense. So if the .net issue goes through with VeriSign in the driving seat, don't be surprised to find those lawsuits quietly disappearing in due course.

Both ICANN and VeriSign were informed of the relevant aspects of this story and their responses are given below with additional comments by ourselves.

ICANN's response

"As part of an open and transparent process the GNSO received comments regarding the RFP criteria - the GNSO then Adopted the RFP criteria and presented it to the ICANN Board - and as an additional part of the open and transparent process ICANN took comments on the draft RFP - that was based on the GNSO criteria - and then the ICANN Board (at its open, public Board meeting in Cape Town) approved the GNSO Criteria and the RFP based upon the GNSO criteria and public comments. This all took place in December - in plenty of time to have people voice concern of the process to date - so what you're therefore contending is factually inaccurate."

Our response: Our story refers explicitly to changes made during the period betwen the GNSO's final approved report on 5 August 2004, and ICANN's first draft of the RFP, released on 12 November 2004. In that time, an enormous number of extra criteria, requested by VeriSign were added, without any additional outside consultation. In addition, an entire new section "Security and Stability", requested by VeriSign, was added.

Also, the explicitly stated fact that "competition" should be the primary relative criteria ("1. Relative criteria related to promotion of competition") used to decide the winner in the GNSO report - which came complete with three categories and three sub-categories - was reduced in ICANN's RFP to relative criteria point "7. Additional Relative Criteria" and comprised just three sub-categories.

VeriSign and the GNSO had numerous public arguments over the competition criteria, during which VeriSign made it very clear it felt competition should come far below other relative criteria such as stability and security.

The result of these changes was to name VeriSign as the winner of the contest. If those changes had not been adopted, VeriSign would not have won the contest.

"ICANN didn't go forward with the evaluation process until all the bidders were satisfied that Telcordia could render an unbiased evaluation."

Our response: What happened was ICANN publicly announced it had chosen Telcordia without consulting or informing the bidders. At the same time as the announcement, ICANN published a disclosure statement from Telcordia, which was preceeded with a statement by ICANN's General Counsel stating that in his opinon that was no legitimate reason why Telcordia should not be chosen as the evaluator.

One bidder, Sentan, immediately complained about Telcordia's suitability. ICANN then called each bidder individually and outlined Sentan's concerns. Bidders were not given the option of veto over Telcordia and had no choice but to accept Telcordia is they wished to continue bidding for .net.

"Pursuant to the adopted RFP process, it is the ICANN Board (not ICANN Staff) that will make any decision and who will consider the following at its upcoming meeting:

A. the Telcordia report; B. the Applicants' written comments on the Telcordia report; C. any response from Telcordia to the Applicants' written comments; D. any and all public or Internet Community comments received by ICANN on its website; and E. the proposed .NET Registry Agreement negotiated between ICANN and VeriSign."

Our response: It is our contention that the process was unfairly skewed (by ICANN staff)in favour of VeriSign before Telcordia had even been chosen. As such, the Board will only have the opportunity to decide on the results of what was already a flawed process.

"I don't think ICANN will have the names of the Telcordia team until the process of commenting on the evaluation by all parties is concluded."

In the previous mentioned disclosure statement from Telcordia, approved by ICANN's General Counsel, it stated: "Neither Telcordia Technologies, Inc. nor individual member of the evaluation team has any financial interest in or similar dealings with any of the applicants". How can ICANN agree with that statement if it does not know the identities of the individual members of the evaluation team? ICANN also informed us over two weeks ago that it had requested the names of the evaluation team from Telcordia. Does ICANN have those names, or has Telcordia withheld them? What are the reasons for not making the names public?

VeriSign's response

"VeriSign did not offer any comments to ICANN outside of the approved comment channels for all bidders and all public comment. Nothing was shown to VeriSign prior to it being publicly available or available to all bidders. "VeriSign offered comments, as I believe all bidders did on the RFP and GNSO report. ICANN posted many of the comments. VeriSign did not make any threat of a lawsuit. VeriSign did - in its comments - note how certain aspects of the RFP and GNSO report were contrary to our contract." Our response: On 24 June 2004, VeriSign informed ICANN: "VeriSign objects to the Draft Procedure for designating a subsequent .net Registry Operator... on the grounds that it does not comply with the procedural or substantive requirements of the existing .net Registry Agreement, the Memorandum of Understanding between ICANN and the Department of Commerce, or the Bylaws of ICANN...

"...VeriSign believes that anything less than the true 'adoption of an open and transparent procedure for designating a successor Registry Operator' is a material violation of applicable requirements on ICANN, including as set forth in the current .net Registry Agreement."

ICANN and the GNSO took this threat seriously enough to seek legal advice from its General Counsel. A vote on final approval of the GNSO report was delayed while this legal situation was reviewed.

If VeriSign didn't explicitly state it would launch a lawsuit, it was certainly assumed by ICANN that this was what VeriSign's statement implied. We believe the threat of a further lawsuit was used to add pressure to VeriSign's demands for changes in the report and its criteria. ®

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